I spent some time reading the Grinnblatt paper. Thanks again for the link. I stand corrected on IQ being uncorrelated with stock prediction. One part did catch my eye.
Our findings relate to three strands of the literature. First, the IQ and trading behavior analysis builds on mounting evidence that individual investors exhibit wealth-reducing behavioral biases. Research, exemplified by Barber and Odean (2000, 2001, 2002), Grinblatt and Keloharju (2001), Rashes (2001), Campbell (2006), and Calvet, Campbell, and Sodini (2007, 2009a, 2009b), shows that these investors grossly under-diversify, trade too much, enter wrong ticker symbols, are subject to the disposition effect, and buy index funds with exorbitant expense ratios. Behavioral biases like these may partly explain why so many individual investors lose when trading in the stock market (as suggested in Odean (1999), Barber, Lee, Liu, and Odean (2009); and, for Finland, Grinblatt and Keloharju (2000)). IQ is a fundamen- tal attribute that seems likely to correlate with wealth- inhibiting behaviors.
I went to some of references, this one seemed a particularly cogent summary.
The take home seems to be that high-IQ investors exceed the performance of low-IQ investors, but institutional investors exceed the performance of individual investors. Maybe it is just insitutions selecting the smartest, but another coherent view is that the joint intelligence of the group(“institution”) exceeds the intelligence of high-IQ individuals. We might need more data to figure it out.
I spent some time reading the Grinnblatt paper. Thanks again for the link. I stand corrected on IQ being uncorrelated with stock prediction. One part did catch my eye.
I went to some of references, this one seemed a particularly cogent summary.
https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/behavior%20of%20individual%20investors.pdf
The take home seems to be that high-IQ investors exceed the performance of low-IQ investors, but institutional investors exceed the performance of individual investors. Maybe it is just insitutions selecting the smartest, but another coherent view is that the joint intelligence of the group(“institution”) exceeds the intelligence of high-IQ individuals. We might need more data to figure it out.