Mark Grinblatt
UCLA Anderson School of Management
Matti Keloharju
Aalto University and CEPR
Juhani Linnainmaa
University of Chicago Booth School of Business
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, measured early in adult life, 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 non-familial 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.
This paper is Forthcoming in the Journal of Finance
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