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IQ, trading behavior, and performance

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Author Info

  • Grinblatt, Mark
  • Keloharju, Matti
  • Linnainmaa, Juhani T.

Abstract

We analyze whether IQ influences trading behavior, performance, and transaction costs. The analysis combines equity return, trade, and limit order book data with two decades of scores from an intelligence (IQ) test administered to nearly every Finnish male of draft age. Controlling for a variety of factors, we find that high-IQ investors are less subject to the disposition effect, more aggressive about tax-loss trading, and more likely to supply liquidity when stocks experience a one-month high. High-IQ investors also exhibit superior market timing, stock-picking skill, and trade execution.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 104 (2012)
Issue (Month): 2 ()
Pages: 339-362

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Handle: RePEc:eee:jfinec:v:104:y:2012:i:2:p:339-362

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Intelligence; Household finance; Trading performance;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Citations

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Cited by:
  1. Erdem, Orhan & Yüksel, Serkan & Arık, Evren, 2013. "Trading Puzzle, Puzzling Trade," MPRA Paper 46804, University Library of Munich, Germany, revised 21 Feb 2013.
  2. Andreu, Laura & Pütz, Alexander, 2012. "Are two business degrees better than one? Evidence from mutual fund managers' education," CFR Working Papers 12-01, University of Cologne, Centre for Financial Research (CFR).
  3. Barber, Brad M. & Lee, Yi-Tsung & Liu, Yu-Jane & Odean, Terrance, 2014. "The cross-section of speculator skill: Evidence from day trading," Journal of Financial Markets, Elsevier, vol. 18(C), pages 1-24.
  4. Beracha, Eli & Fedenia, Mark & Skiba, Hilla, 2014. "Culture's impact on institutional investors' trading frequency," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 34-47.
  5. Rawley Z Heimer, 2013. "Friends do let friends buy stocks actively," Working Paper 1314, Federal Reserve Bank of Cleveland.

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