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IQ, trading behavior, and performance

Author Info

Listed author(s):
  • 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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File URL: http://www.sciencedirect.com/science/article/pii/S0304405X1100211X
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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
DOI: 10.1016/j.jfineco.2011.05.016
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

Keywords: Intelligence; Household finance; Trading performance;

Find related papers by JEL classification:

  • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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