Journal of Finance Vol. 66 No. 6 2011

IQ and Stock Market Participation

Mark Grinblatt^1,2; Matti Keloharju^3,4,5; Juhani T. Linnainmaa^6,1,7

¹ National Bureau of Economic Research · ² University of California, Los Angeles · ³ Centre for Economic Policy Research · ⁴ Research Institute of Industrial Economics · ⁵ Aalto University · ⁶ Dartmouth College · ⁷ Finnish Defence Forces

Abstract

Stock market participation is monotonically related to IQ, controlling for wealth, income, age, and other demographic and occupational information. The high correlation between IQ and participation exists even among the affluent. Supplemental data from siblings, studied with an instrumental variables approach and regressions that control for family effects, demonstrate that IQ's influence on participation extends to females and does not arise from omitted familial and nonfamilial variables. High‐IQ investors are more likely to hold mutual funds and larger numbers of stocks, experience lower risk, and earn higher Sharpe ratios. We discuss implications for policy and finance research.

DOI

10.1111/j.1540-6261.2011.01701.x

Volume

66

Issue

6

Pages

2121-2164

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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