IQ and Stock Market Participation





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    • Grinblatt is with UCLA Anderson School of Management, Keloharju is with Aalto University and CEPR, and Linnainmaa is with the University of Chicago Booth School of Business. We thank the Finnish Armed Forces, the Finnish Central Securities Depository, the Finnish Tax Authorities, and the Helsinki Exchanges for providing access to the data, as well as the Office of the Data Protection Ombudsman for recognizing the value of this project to the research community. Our appreciation also extends to Antti Lehtinen, who provided superb research assistance, and to Alan Bester; John Cochrane; John Heaton; Harrison Hong; Emir Kamenica; Samuli Knüpfer; George Korniotis; Adair Morse; Toby Moskowitz; Richard Thaler; and Annette Vissing-Jørgensen, who generated many insights that benefited this paper. We also thank Markku Kaustia; Samuli Knüpfer; Lauri Pietarinen; and Elias Rantapuska for participating in the analysis of the Finnish Central Securities data; as well as Rena Repetti; Mark Seasholes; Chicago Booth students of Bus 35000-02/81/85; and seminar participants at UCLA, the University of Chicago, University of Maryland, University of Southern California, the U.S. Securities and Exchange Commission, the American Economic Association annual meetings, the 2010 European Winter Finance Summit, and the 2010 Western Finance Association annual meetings for comments on earlier drafts. Finally, we are especially grateful for the detailed comments of an anonymous referee, an associate editor, and the Editor, Campbell Harvey. We acknowledge financial support from the Laurence and Lori Fink Center for Finance and Investments, the Academy of Finland, the Foundation for Economic Education, the Foundation for Share Promotion, and the OP-Pohjola Research Foundation.


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.