IQ and Stock Market Participation

Mark Grinblatt
UCLA Anderson School of Management

Matti Keloharju
Aalto University and CEPR

Juhani Linnainmaa
University of Chicago Booth School of Business

January 10, 2011

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.

Keywords: Intelligence, household finance, stock market participation

JEL classification: G11, D14

                                                            

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 and seminar participants at the University of Chicago, UCLA,
Maryland, USC, the US Securities and Exchange Commission, the 2010 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.
  1

Only about 50% of U.S. households invest in stocks, either directly or indirectly (via

mutual funds in retirement and non-retirement accounts), and participation in Europe is even

lower.1 Traditional models in financial economics, which prescribe universal participation,2

cannot easily explain these stylized facts, viewing them as a “participation puzzle.” Rather, these

facts lend support to the common sense view that limited wealth precludes savings, let alone

investment in risky stocks. However, “common sense” does not explain the degree of

nonparticipation among those who can afford to invest.

A vast and rapidly growing literature seeks to explain why those who can afford to save

fail to participate.3 Frictions associated with the direct costs of participation have been advanced

as one possibility, but given how small these costs are, they are unlikely to explain the degree of

nonparticipation observed. Non-traditional preferences can also explain the participation puzzle,

but these unorthodox preferences lack wide acceptance in the literature. Nonparticipants also

might believe that stock markets offer lower returns to them than to participants because the

latter have access to better information, technology, and professional advice—an explanation

that links participation to both wealth and cognitive ability.

                                                            
1
See Bucks, Kennickell, and Moore (2009) and Guiso, Sapienza, and Zingales (2008).
2
For example, Arrow (1965) shows that investors at every risk tolerance level optimally hold risky stock because
the equity premium is positive and investor preferences are locally risk-neutral at zero risky investment.
3
Haliassos and Bertaut (1995), studying the U.S. Survey of Consumer Finances, conclude that “inertia and
departures from expected-utility maximization” might explain nonparticipation. Vissing-Jørgensen (2003) finds that
moderate fixed participation costs explain the nonparticipation of many U.S. households. However, Mankiw and
Zeldes (1991) and Heaton and Lucas (2000) argue that such fixed costs do not explain the rate of nonparticipation
among the wealthy. To explain the latter, researchers turn to lack of stock market awareness (Hong, Kubik, and
Stein 2004; Guiso and Jappelli 2005; Brown, Ivković, Smith, and Weisbenner 2008), non-standard preferences like
ambiguity aversion (Dow and Werlang 1992; Ang, Bekaert, and Liu 2005; Cao, Wang, and Zhang 2005; Epstein and
Schneider 2006), education deficits (Campbell 2006; Calvet, Campbell, and Sodini 2007; Christiansen, Joensen, and
Rangvid 2008; Rooij, Lusardi, and Alessie 2007), and lack of trust (Guiso, Sapienza, and Zingales 2008).
  2

This paper studies cognitive ability as a driver of participation. Limited ability to process

information, an indirect participation cost, already is a widely advanced explanation for

nonparticipation, but testing this hypothesis has been problematic. Resolving whether cognitive

skill plays a significant role in participation has implications both for policy and for financial

models. For example, if cognitive skill plays no role in participation, and decisions are optimally

made, policies that force individuals to participate in the stock market, (e.g., President Bush’s

social security reform proposal), reduce welfare.4 By contrast, if cognitive skill influences

participation, tax incentives and financial literacy programs may be less effective and cost more

than retirement plan defaults that force workers to opt out of equity funds. Moreover, the

standard aggregation theorems that simplify asset pricing models may not apply when variation

in portfolios across investors does not exclusively arise from differences in risk aversion and

wealth. Lastly, if many individuals stay out of the market for reasons unrelated to asset prices,

empiricists can ignore nonparticipants’ consumption and use stockholder consumption data to

calibrate asset pricing models.5

Measurable traits that reflect a subject’s skill at processing information are hard to come

by and, if available, generally plagued with a host of endogeneity issues. Christelis, Jappelli, and

Padula (2009), using survey data from almost 20,000 European seniors, find that answers to the

number of animals one can name in one minute, the number of nouns (out of 10) one recalls, and

a series of up to four numeracy questions influence self-reported stock market participation. In

                                                            
4
For example, Benzoni, Collin-Dufresne, and Goldstein (2007) suggest that young individuals should take short
positions in stocks because returns to their human capital significantly correlate with market returns.
5
Stockholder data better match the salient features of asset prices because the consumption of stockholders is more
volatile and more highly correlated with the excess market return than the consumption of nonparticipants. See
Mankiw and Zeldes (1991), Brav, Constantinides, and Geczy (2002), Vissing-Jørgensen (2002), Vissing-Jørgensen
and Attanasio (2003), and Malloy, Moskowitz, and Vissing-Jørgensen (2009).
  3

related work, Benjamin, Brown, and Shapiro (2006) study how intelligence-related test scores

from 1980 influence 2,088 sibling groups’ answers to the question posed in 1998 and 2000: “Do

you (or your spouse) have any common stock, preferred stock, stock options, corporate or

government bonds, or mutual funds?” Their findings, from the National Longitudinal Survey of

Youth, were later extended to additional dimensions of cognitive ability in Cole and Shastry’s

(2009) analysis of the same dataset. Finally, Kezdi and Willis (2003) show that IQ influences

the reported participation of more than 12,000 National Retirement Survey subjects.

We study Finnish stock market participation at the end of 2000 as a function of IQ

measured early in adult life; we also study the relation between IQ and various contributors to

portfolio risk and return. The IQ scores are comprehensive for Finnish males in a 20-year age

range because they are obtained on induction into Finland’s mandatory military service. We have

IQ data on all inductees entering service between 1982 and 2001, as well as stock registry and

mutual fund ownership data that unambiguously assess inductees’ stock or mutual fund

ownership later in life. We also have the year 2000 tax returns of approximately 160,000 of these

inductees. The tax returns contain subject-level controls for different types of wealth, income,

marital status, children, age, home and foreign asset ownership, primary language, employment

status, and occupation (including whether one is an entrepreneur, farmer, or finance

professional). We control for education, using zip code level data for each age grouping.

In contrast to other research on the topic, our study employs a larger sample and contains

more controls. Its sophisticated econometric techniques—control function regression, Blinder-

Oaxaca-Fairlie decompositions, and Chamberlain random effects—remedy pitfalls in this line of

research. Address data facilitate standard error clustering at the zip code level, avoiding
  4

inferential biases from correlated residuals within neighborhoods. Finally, individual-level

ownership data facilitates study of IQ’s link to various determinants of portfolio risk and return.

Most importantly, we do not rely on voluntary surveys. Kezdi and Willis (2009), for

example, find that low-IQ respondents simply do not know how to answer many queries in the

National Retirement Survey, leaving many of them blank. Low-IQ investors also are more likely

to answer “no” to ownership queries that describe financial instruments in more complex terms

than they are used to (e.g., “equity” rather than “stock,” “fund” rather than “account”). For half

of the aforementioned studies of participation, affirmative participation responses are supposed

to arise from mutual fund ownership. Even if money market fund ownership is related to stock

market participation, a survey designed in this fashion could generate a spurious IQ-participation

relationship if high-IQ investors better understand that their money market account is a mutual

fund.6 Malloy et al. (2009) express notable concern about the reliability of survey responses to

participation questions. Some of their analyses throw out almost half of all survey responses

because a probit predictor of participation is inconsistent with the survey response. By contrast,

our stockholdings are drawn directly from ownership records, are comprehensive, and lack the

response bias inherent in almost all surveys. Our mutual fund holdings, drawn from tax records,

are reported to the tax authorities by the mutual funds themselves rather than being self-reported.

The data set reports the aggregate value of mutual funds owned by each individual on December

31, 2000, but does not identify the specific funds held.

Probit regressions exhibit IQ stanine dummies with perfectly monotonic coefficients. The

highest-IQ subjects are most likely to participate; those with the second-highest scores

                                                            
6
For a more comprehensive critique of survey data, see Campbell (2003) and Lamont (2003).
  5

participate more than those with the third-highest scores, etc. The economic size of the IQ effect

is remarkably large—larger than income’s participation effect. Moreover, all IQ subcomponents

(logical, verbal, and especially mathematical scores) influence participation.

In part because of the early age at which our study’s IQ variable is measured, one might

plausibly believe that the observed correlation between IQ and the regression’s control variables

arises from IQ’s effect on the controls rather than the reverse. In this case, IQ differences

account for differences in participation, not only independently from controls like education,

wealth, and income, but also by having an influence over these controls. We decompose IQ’s

effect on participation into various channels through which this secondary IQ effect operates. For

example, subjects with the second-highest IQ stanine have a 42.5% participation rate. By

contrast, those in the second-lowest IQ stanine have a 13.1% participation rate. About three fifths

of the 29.4% difference in participation rates can be explained by differences in the means of the

control variables across the two stanines. The decomposition indicates that IQ-related wealth,

education, and income differences are the channels of primary importance. This conclusion also

applies to other pairings of IQ groups at opposite ends of the IQ spectrum.

Lack of cognitive skill is so fundamental as a driver of nonparticipation that it deters

large amounts of wealth from entering the stock market. As verification of the latter conclusion,

we also study the influence of IQ on the participation decisions of affluent individuals. These

individuals face direct costs of participation that are relatively small in comparison to its

benefits. If these market-based frictions fully accounted for nonparticipation, we would not

expect IQ to influence the participation of the affluent to any great extent. However, we find that

IQ’s role in the participation decisions of the affluent is about the same as it is for the less

affluent. The definition of affluence—net worth or income—does not affect this finding.
  6

The quality of our data offers other unique benefits that prior empirical research has not

been able to take advantage of. Analysis of sibling data facilitates the use of several powerful

econometric techniques. From these techniques, we conclude that omitted variables—such as

risk aversion or more precise education categories—tied to one’s own IQ or to one’s family’s

average IQ, are unlikely to account for the effect of IQ on participation. A proper instrumental

variables analysis of brothers employing the control function method indicates that IQ measured

from a brother’s IQ exam plays a significant role in the subject’s participation decision. (The

finding extends to sisters’ participation.) Moreover, probit analysis of brothers using

Chamberlain’s (1980) random effects approach indicates that individual IQ differences, even

within families, help to explain differences in participation.

IQ could influence participation if a subject’s risk-return trade-off is positively related to

his IQ. Motivated by this conjecture, we document that IQ correlates with participants’ Sharpe

ratios, controlling for the usual suspects, and trace this correlation to IQ-related differences in

diversification and systematic risk.7 High-IQ participants are more likely to hold mutual funds,

larger numbers of stocks, and have lower-beta portfolios than lower-IQ participants. High-IQ

investors also have greater exposure to the risks of small and value stocks. These results lend

credence to the story that high-IQ subjects participate because they face a superior risk-return

trade-off and that low-IQ subjects shun participation because they make investment mistakes.

The paper is outlined as follows: Section I describes the data along with summary

statistics. Section II’s regressions analyze IQ and participation. Section III studies the risk-return

trade-off faced by IQ-sorted participants. Section IV summarizes and draws conclusions.

                                                            
7
Because we lack data on which funds each individual holds, but know the total value of fund holdings at the
investor level, the estimated Sharpe ratios rely on assumptions about fund composition.
  7

I. Data and Summary Statistics

A. Six Data Sets That We Merge for Our Analysis

Finnish Central Securities Depository (FCSD) Registry. This dataset contains the

daily portfolios and trades of all Finnish household investors in FCSD-registered stocks (all

traded Finnish stocks plus all foreign stocks traded on the Helsinki Exchanges) from January 1,

1995 through November 29, 2002.8 The electronic FCSD data we use, which exclude ownership

of mutual funds, are exact duplicates of the official records of ownership and trades, and hence

are very reliable. We use the FCSD holdings on December 31, 2000, the report date for control

variables obtained from other data sets described below, to assess whether an investor holds any

stocks, which stocks the investor owns, and what their stock portfolio is worth.

HEX Stock Data.  The Helsinki Exchanges (HEX) provide daily closing transaction

prices and returns for all stocks traded on the HEX. Year 2001 daily returns are combined with

the FCSD data to measure the return variance of each individual’s stock portfolio.

Finnish Tax Administration (FTA) Data. The Finnish Tax Administration provides

entries from the year 2000 tax returns of all individuals domiciled in the provinces of Uusimaa

and East Uusimaa, a region encompassing Greater Helsinki, as well as data from a population

registry. Variables constructed from this source include ordinary (labor) income (referred to as

“income”), taxable net worth from all sources (referred to as “wealth”), whether and to what

extent one owns various assets (a home, forest, mutual fund, stock in a non-public company, or

                                                            
8
Grinblatt and Keloharju (2000) provide the relevant details about this data set.
  8

foreign assets), native language (Finnish or Swedish), marital status (single, married, or

unmarried but cohabiting), whether one has dependents under age 18, occupation (including

whether one is an entrepreneur, farmer, or finance professional), employment status, year of

birth, and gender (used to produce a comprehensive sample of females from the two provinces

with the same set of variables described above). We also use this data set, in conjunction with the

FCSD data set, to assess participation—a dummy variable that takes on the value one for

subjects who held any FCSD-registered stock or FTA-reported mutual fund on December 31,

2000.9 Our robustness checks, reported in an Internet appendix, analyze narrower definitions of

participation, including participation arising from the holding of at least one individual stock at

the end of 2000, and whether one purchased stock on or before November 29, 2002.10

Finnish Armed Forces (FAF) Intelligence Assessment. Around the time of induction

into mandatory military duty in the FAF, typically at age 19 or 20, and thus generally prior to

significant stock trading, males in Finland take a battery of psychological tests to assess which

conscripts are most suited for officer training. One portion consists of 120 questions that score

cognitive functioning in three areas: mathematical, verbal, and logical skill. The FAF aggregates

these sub-scores to form a composite intelligence score, which we use and refer to as IQ. IQ is

                                                            
9
Finnish Mutual Fund Report December 2000, reports that 94% of Finnish mutual fund accounts were in equity or
balanced funds. A negligible fraction of fund investors use money market or bond funds exclusively. Because the
FTA does not identify fund type, a few participants could be misclassified for this reason.
10
55% of fund owners also own stock, while 22% of those who own individual stocks also own funds. The median
number of stocks held is 2. The median individual stock portfolio value is 3,440 Euros. The end-of-2000 values of
Finnish households’ mutual fund and individual stock holdings were 5.2 billion and 23.7 billion Euros, respectively.
The Internet appendix is available online at http://faculty.chicagobooth.edu/juhani.linnainmaa/
IQParticipationIA.pdf.
  9

standardized to follow the stanine distribution (integers 1- 9 with 9 being most intelligent).11 We

have test results for all exams that were scored between January 1, 1982 and December 31, 2001.

Variation in measured IQ is unlikely to reflect significant differences in culture or

environmental factors like schooling that might be related to participation. Compared to other

countries, the Finnish school system is remarkably homogeneous: all education, including

university education, is free and the quality of education is uniformly high across the country.12

The country is also racially homogeneous and, because of the FTA dataset, most of the subjects

studied live in the largest urban area within Finland. These factors make it more likely that

differences in measured IQ reflect differences in innate intelligence.

Finnish Address Data Set. A supplementary section of the tax return data contains

current and historical addresses for all individuals domiciled in the provinces of Uusimaa and

East Uusimaa. We have every subject’s residence on each day from 1998-2000, the move-in date

for the first address in this three-year period, and the move-out date (up to late 2002) for the

three-year period’s last address. For example, if a person was born on February 7, 1963, moved

to a new address on June 10, 1968, and resided there until 2003, the data show the latter address,

the June 10 move date, and continual residence between June 10, 1968 and December 31, 2002.

All addresses were converted to latitude and longitude coordinates. The coordinates were then

translated and rotated with parameters that were destroyed to maintain anonymity.

                                                            
11
A “stanine” (standard 9) distribution discretely partitions the normal distribution into 9 intervals, with stanine 5
being the mean. A 1 stanine score difference represents 1/2 of a standard deviation for the median subject within
each stanine. Because value 9 subjects represent continuous scores rounded up from 8.5, stanine 9 subjects are all at
least 1.75 standard deviations above the mean (approximately 4% of the population). Likewise, stanine 1 investors
are at least 1.75 standard deviations below the mean, stanine 2 at least 1.25 standard deviations below the mean, etc.
12
See, for example, a recent article in the Economist (December 6, 2007) and Garmerman (2008).
  10

The historical location data combined with gender data from the FTA determine brother-

brother and brother-sister sibling pairs. Two individuals born within 15 years of one another are

siblings if they can be classified as either (i) both moving on the same date to the same location

and both moving out of that location at a later date or (ii) living in a single family dwelling at the

same location at some date. If the latter, we also impose a parent criterion: that one other person,

or exactly two opposite-gendered persons live at the same address at the same date, with the

younger of the two being at least 18 years older than the oldest member of the sibling pair. We

also use transitivity to establish sibling pairs. For example, suppose A and B are siblings, based

on the criteria above. If B and C can also be established as a sibling pair, then A and C is a

sibling pair. As an additional criterion for siblings generated by transitivity, we require A and C

to share a common adult.13 These criteria, which also restrict siblings to be 18 or older as of

December 31, 2000, may omit sibling pairs but are unlikely to misclassify a pair as siblings.

Finnish Census Data Set. We employ average education level of adults of similar age

within the subject’s end-of-2000 zip code to control for the subject’s education. The census data

set breaks educational attainment into four categories: basic education which ends at 9th grade,

vocational education, matriculation (a high-school diploma earned by passing a college-prep

examination at the end of 12th grade), and university degree. For each zip code and each of four

age groups―18-24, 25-34, 35-44, and 45-54―the data set reports what fraction of the age group

                                                            
13
We also know these rules establish reliable sibling pairs because when we apply the rules to identify brother-
brother pairs, the IQ correlation is 0.40. This correlation is similar to those found in the literature on IQ and families.
Bound, Griliches, and Hall (1986), for example, report a brother-brother correlation of 0.44 and brother-sister
correlation of 0.48 in the U.S. National Longitudinal Surveys of Young Men and Young Women.
  11

attained each of these education levels. We estimate the subject’s education level as the average

for the age group living within his residence zip code on December 31, 2000.14

B. Summary Statistics

Table 1 reports summary statistics for the 158,044 males who took the FAF intelligence

test between 1982 and 2001 and for whom we have year 2000 tax returns and zip-code level

education data for the subject’s age group. (We later extend our analysis to 4,358 sisters of these

subjects.) The data window, combined with the requirement that military service commence

prior to age 29, implies that our subjects were born between 1953 and 1982. Panel A lists the

theoretical distribution and describes the distribution of IQ scores both for the subjects used in

our regression and for the entire FAF data set. Panel B reports average values of variables used

to develop control regressors (often as decile-based category dummies). This includes averages

for all males in the study, as well as average values based on whether the males participate in the

stock market. Panel C reports the means of these same variables as a function of IQ.

The third row of Panel A shows that the intelligence scores in our sample are slightly

higher than both the theoretical stanine distribution and the scores of males throughout Finland.

This is because the FTA (tax) data, from which we derive most of our controls, come from those

who reside either in the largest and most urban province in Finland (Uusimaa) or its neighboring

province (East Uusimaa). These provinces tend to attract affluent professionals. This mean effect

is of little concern as there are sufficiently large sample sizes within each IQ stanine.
                                                            
14
We later use zip-code aggregated IQ scores to address errors-in-variables issues arising from lack of individual-
level education data.
  12

Panel B shows that the participant and nonparticipant groups markedly differ in many

dimensions (all significant at the 1% level). Participants’ average IQ stanine is almost a full point

(about half a standard deviation) above the average for nonparticipants. Figure 1, which graphs

IQ distribution for participants and nonparticipants, illustrates that the difference in the average

IQ scores of participants and nonparticipants does not arise from a preponderance of IQ scores of

any one stanine for either group. There are relatively fewer participants in every below-average

IQ stanine and more in every above-average IQ stanine. Panel B also shows that for all variables

used to construct regression controls, participants’ average values differ from those of

nonparticipants. Participants, with average annual wages of 29,604 Euros per year, earn about

50% more labor income than nonparticipants’ 19,901 Euro average, are wealthier, and have a

greater tendency to own homes, forests, and private equity (typically their business).

Using zip-code level education data for each age grouping, we find nonparticipants are

more likely to have only basic education (less than high school) or vocational education while

participants are more likely to have earned a university degree. Other demographic variables like

employment and marital status also are related to market participation. Participants are 1.24

times more likely than nonparticipants to marry, 1.08 times more likely to have kids, five times

more likely to work in the finance profession, and three times less likely to be unemployed.

Panel C, which presents averages for these same variables conditional on IQ stanine,

shows that many variables are related to IQ. Income and wealth are almost perfectly monotonic

in IQ. Average income increases from 16,062 Euros per year for stanine 1 to 31,707 Euros per

year for stanine 9. Taxable net worth increases from just 3,627 Euros for the lowest-IQ category

to 43,619 Euros for the highest-IQ category. Using zip-code level data, the proportion of

individuals attaining only basic education monotonically decreases from 24% for the lowest-IQ
  13

stanine to 19% for the highest. At the same time, the fraction of individuals with university-level

education monotonically increases from 15% to 20% as the IQ stanine increases from 1 to 9. The

IQ-related differences of other control variables are also notable. The unemployment rate of the

lowest-IQ stanine is about 10 times higher than the rate observed among those with the highest-

IQ stanine. The homeownership rate increases from 28% to 43%; the marriage rate goes from

22% to 33%; and the fraction of people working in the finance profession increases from 0% to

about 2% as we move from the least to the most intelligent stanines. Most notable, however, is

that the participation rate increases monotonically: from 10% for stanine 1 to 47% for stanine 9.

II. IQ and the Participation Decision

A. Probit Regressions of Participation Decisions on IQ and Controls

Bivariate relationships, like those documented in Table 1, sometimes diminish or

disappear when controls are introduced. Our primary analysis therefore uses regression to study

IQ’s marginal effect. Because the participation outcome is binary, Table 2 reports probit

coefficients, test statistics (from zip-code clustered residuals), and marginal participation rate

effects (at the average values of non-IQ regressors) for two regression specifications of a stock

market participation dummy15 against IQ and a host of control variables.

The “IQ dummy specification,” observed in the first three columns, employs dummies for

each IQ stanine. The dummy for the highest-IQ score, stanine 9, serves as the omitted category.

The 1,912.5 Wald statistic at the bottom of the first column tests whether the participation rate of

                                                            
15
Recall that the participation dummy is one only if a subject holds FCSD stocks or mutual funds at the end of 2000.
  14

the highest-IQ stanine differs from the other eight stanines. The critical chi-squared value of the

Wald statistic using the 0.001 significance level is 26.1. The effect of IQ on participation also is

perfectly monotonic. Those in the lowest-IQ stanine are less likely to own stock than individuals

with the second-lowest-IQ stanine, etc. The economic significance is equally impressive. The

marginal effects column indicates that the lowest-IQ individuals have a participation rate that is

20.5 percentage points less than that of the highest-IQ individuals.

The “linear-IQ specification,” reported in the three rightmost columns of Table 2,

explores IQ stanine as a single variable. Not surprisingly, the results and their interpretation are

similar to those for the IQ dummy specification. The IQ coefficient of 0.090 for this specification

mirrors the average difference in coefficients for the IQ dummy specification.

The 67 regression control variables, described in the prior section, include educational

attainment proxies, cohort fixed effects (i.e., birth-year dummies),16 as well as dummy variables

for income decile, wealth decile, certain types of wealth ownership and occupations, native

language, marital status, and employment status. A few of these variables have previously been

used in the participation literature. Many of their coefficients are highly significant. For example,

individuals in income deciles 1-9 are significantly less likely to be participants than the highest

income subjects in decile 10. Moreover, the coefficients are impressive. For example, the

marginal effects column for the IQ dummy (left) specification indicates that the highest income

decile (omitted) has a participation rate that is 5.9 percentage points greater than any other

decile, keeping other observables, including wealth, fixed. Unemployed individuals have a

participation rate that is 11.3 percentage points lower than employed individuals. Finance

                                                            
16
Korniotis and Kumar (2009) relate age to investment skill.
  15

professionals’ participation rate is 17.0 percentage points greater than that of other professions.

Consistent with Heaton and Lucas (2000), entrepreneurs’ participation rate is 7.9 percentage

points lower than that of others. With the linear-IQ specification, individuals in the highest

income category have a 13.3 percentage point greater participation rate than those in the lowest

income decile; the marginal effects of being employed, having a career as a finance professional,

or working as an entrepreneur are similar to those from the IQ dummy specification.

The most striking coefficients belong to IQ rather than to the controls. In the IQ dummy

specification, the marginal effects and probit coefficients of the two lowest stanines (about 10%

of the sample) are 20-30% larger than the corresponding impact from being in the lowest income

decile. This is remarkable considering that the IQ test consists of just 120 questions and, for most

subjects, is assessed many years before measuring participation. By contrast, income is measured

contemporaneously with participation and deemed to be highly reliable because of criminal

penalties for false reporting. Wealth, controlling for all other variables, including birth year

dummies, seems relatively more important, but this could be due to participation causing wealth:

the 1990s were a good decade for owning Finnish stocks.

Neoclassical participation theories (e.g., Vissing-Jørgensen (2002, 2003)) argue that even

modest direct costs of participation deter participation for less wealthy individuals: benefits from

participation are small when there is little at stake in the markets. With no measurement error,

misspecification, or endogeneity biases, these theories predict a wealth effect on participation

  16

only at the lower wealth levels. This prediction is inconsistent with the observation that subjects

in the highest net worth decile are, by far, most likely to participate.17

Our findings are consistent with prior studies of IQ and participation in suggesting that

quantitative-skill components of IQ are prominent determinants of participation. The composite

IQ score we use is computed from three sub-scores, one of which is mathematical ability. Each

of the three sub-scores is highly correlated with the composite score: correlation coefficients

range from 0.83 to 0.89. Separate analyses of Table 2’s linear specification with each of the three

subcomponents of IQ indicate that each influences participation (with the lowest t-statistic

exceeding 32). The mathematical-ability coefficient, 0.088, is virtually identical to Table 2’s

composite score coefficient (0.090); the other two sub-scores have coefficients of 0.070 (verbal

ability) and 0.065 (logical ability). The verbal and logical components significantly influence

participation in a linear specification that includes all three components in the same regression.

Irrespective of whether composite IQ or its subcomponents are used, our measure of

cognitive ability remains a salient determinant of participation when compared to the control

variables. The importance of IQ lends credence to a theory of participation that is at least partly

based on cognitive segmentation. One way to quantify IQ’s importance in relation to the controls

is a specification that replaces the linear-IQ specification’s wealth decile dummies with wealth.

In this specification, the IQ coefficient is 0.096 and the coefficient on wealth is 9.05 x 10-6,

generating a ratio of 10,608. Thus, each one-stanine drop in IQ, which corresponds to half a

standard deviation drop in ability, is equivalent to a 10,608 Euro decline in taxable net worth.

                                                            
17
Vissing-Jørgensen (2003, pp. 179-180) would dismiss similar contradictions as following from participation costs
that are decreasing in IQ and measured wealth correlating with differences between true and measured IQ.
  17

All results are robust to measuring participation in alternative years, omitting various

blocks of control regressors, using age-filtered subsamples, and excluding Nokia holdings.18

However, two issues remain. First, as a condition for use of the highly sensitive and private IQ

data, we had to omit individual education controls from this study. To assess whether noisy

education controls (due to aggregation) affect our main finding, we redid Table 2’s analysis,

replacing an individual’s IQ with the corresponding average from the age cohort within his zip

code. Aggregating IQ in the same manner as education yields coefficients and test statistics that

are similar to Table 2’s coefficients and test statistics.19 Similar results obtain when replacing all

regressors with their age-stratified zip-code averages. We later address this issue further with two

statistical techniques designed to address errors-in-variables and omitted variables biases.

The second issue is that we lack data on place of employment. At the end of 2000,

approximately 40% of FCSD-registered companies had issued stock or options to their

executives or employees. The average (median) number of investors in a plan is 544 (86). If

smarter individuals are more likely to be awarded stock or options by their employer, the IQ-

participation relationship may reflect employment-based awards, rather than any active decision

by high-IQ subjects to hold stock. However, replacing Table 2’s dependent variable with various

participation dummies designed to limit the influence of compensation on participation yields

                                                            
18
When various blocks of control regressors are dropped, the linear-IQ coefficient becomes 0.107 (education
dropped), 0.102 (wealth dropped), and 0.109 (income dropped). Splitting the sample by subject age, the linear-IQ
coefficient is 0.078 in the 1953-69 birth-year sample and 0.098 in the 1970-82 sample, suggesting that the IQ effect
weakens slightly with age. We also reran the linear specification for the sample of (generally older) male investors
who lack an IQ score. These analyses (detailed in the Internet appendix) indicate that our sample is representative.
19
For example, with the zip-code aggregated IQ dummy specification, the coefficients on IQ dummies 1, 2, and 3,
are respectively -1.010, -0.779, and -0.738 (all highly significant) whereas in Table 2 they are -0.706, -0.580, and -
0.477. The Wald statistic for joint significance of the zip-code aggregated IQ dummies, 80.1, is still highly
significant. For the linear specification, the noisy IQ measure’s coefficient, 0.131 (with a probit z-value of 6.91),
exceeds the 0.090 coefficient in Table 2 (with a probit z-value of 41.84).
  18

similar results to Table 2. These include participation defined to be holding of a mutual fund (but

not stock), holding of at least two different individual stocks, or purchase of stock with cash.20

Results from all three analyses concur with Table 2’s conclusion that IQ is significantly

positively related to stock market participation.

B. Participation Decisions of Affluent Individuals

The benefits of participation have been quantified for neoclassical preferences. These

benefits increase in wealth and appear to exceed the direct costs of participation for all but the

poorest individuals. Hence, if participation costs deter participation, only the poor would

rationally avoid stockholdings.21 Cochrane (2007) concludes from this that participation costs

have little effect on asset pricing; these costs deter only negligible amounts of wealth from the

stock market. Related to this, Curcuru et al. (2009) and Campbell (2006) observe that the degree

of nonparticipation among wealthy individuals is puzzling. They reason that direct participation

costs cannot plausibly explain such nonparticipation. However, other mechanisms that might

account for this phenomenon have not been verified empirically.

Table 2’s IQ coefficients point to other frictions that hinder stock market participation. In

contrast to the fixed costs of participation, nonparticipation that arises from limited cognitive

skill could deter participation by the affluent. The credibility of this hypothesis is best assessed

                                                            
20
The third definition excludes purchase with employer-issued warrants or convertible bonds, shares purchased
before a company is publicly listed, purchases of employee tranches of offerings or private placements. We are
grateful to an anonymous referee for suggesting many of these analyses, detailed in the Internet appendix.
21
See, for example, Vissing-Jørgensen (2002, 2003).
  19

by empirical study of IQ’s influence on the participation of the most affluent subjects in our

sample—those in the top decile of the wealth and income distribution. These affluent individuals

are not constrained by any fixed cost of market entry but could be deterred by limited cognitive

skill. Another motivation for studying the affluent is that one cannot explain their IQ-related

nonparticipation as a spurious consequence of noisy measurement of income or wealth controls.

It would take an implausibly large amount of measurement error to misclassify those too poor to

rationally bear participation costs as belonging to the 10% most affluent subjects.22

Table 3 employs the probit regression methodology of Table 2 to estimate the

participation regressions for affluent individuals. Panel A restricts the sample to subjects with

ordinary income in the top decile; Panel B restricts it to those with taxable net worth in the top

decile. For obvious reasons, the former regression omits income decile controls and the latter

omits wealth decile controls (in contrast to Table 2’s regressions). With both affluence metrics,

IQ significantly predicts participation. For the IQ dummy specification, the IQ coefficient pattern

remains almost perfectly monotonic. The economic significance column indicates that the

participation rate for the lowest-IQ stanine is 15.7% lower than the rate of the highest-IQ stanine

for the income-affluent specification; it is 22.5% lower for the wealth-affluent specification.

Although the sample is smaller, which tends to increase estimation error, the coefficients for the

low-IQ stanine dummies in Table 3 are similar to those for the full sample in Table 2.

These results speak to IQ’s important role in the participation decisions of the most

affluent individuals—negating criticism of Table 2’s link between IQ and participation based on

noisy measurement of wealth or income. Table 3 also refutes the argument that IQ affects

                                                            
22
Moreover, rare misclassifications are unlikely to account for the magnitude of Table 2’s IQ coefficients.
  20

participation because it might be positively correlated with risk tolerance. If frictions, like entry

costs, deter the most risk averse, the effect should be prominent only for the least affluent.

C. Secondary Channels for IQ

Table 2’s regressions demonstrate that IQ’s influence over stock market participation

does not arise from its correlation with measured income, wealth, education, and a host of other

control variables. However, IQ could drive many of these variables. Hence, there are secondary

channels through which IQ may influence participation. For example, our data indicate that a

high-IQ individual is more likely to be married, have a high income, be wealthy, and have

children. He also is more likely to be in certain professions, like financial services. These

secondary channels may lead to stock market investment. High-income subjects tend to save

more; for them, a comfortable risk-free nest egg can coexist with stockholdings. A parent may

hold risky assets to provide for a child’s future. To assess IQ’s influence on participation via

secondary channels, Table 4 presents results from a decomposition developed in Blinder (1973),

Oaxaca (1973), and Fairlie (1999, 2005). Panel A presents results for control variables that

partially account for the 36.7% difference in participation rates between IQ stanines 1 and 9;

Panel B presents results on control variables that partially account for the 29.4% difference in

participation between IQ stanines 2 and 8. While any pairing of stanines can be analyzed with

this approach, we study only two extremes—the stanine 1, 9 and 2, 8 pairings—for brevity.

To derive the decomposition, we first repeat Table 2’s regression, but omit the IQ

regressor(s), generating control variable coefficients and predicted z-scores for each stanine

group. Predicted z-scores, the summed product of the regression coefficients and the control
  21

variables’ group means, are then translated into predicted participation rates. The technique

additionally computes the marginal effect of group mean differences for seven natural collections

of the control variables. For a given stanine pairing, marginal effects are the sequence of changes

in predicted participation rates, obtained by sequentially changing each control variable

collection’s value (a vector) from its group mean at the lower stanine to its mean at the higher

stanine. Sequencing of the changes in the seven collections of control variables must be

randomized, repeated, and averaged, and members must be paired across the two stanines, to

obtain marginal changes in participation rates and test statistics. For details, see Fairlie (2005).

Table 4 Panel A indicates that group-mean differences in the control variables account

for almost two thirds (0.635) of the 36.7% difference in participation rates between stanines 1

and 9. There is an 8% difference in participation that is explained by differences in wealth

between the stanines (holding other control variables fixed), a 6% difference explained by

education differences alone, a 6% difference explained by income alone, and a 2% difference

explained by profession and employment status dummies. The remaining control variables have

far less effect either because the group means scarcely differ between stanines 1 and 9 or because

group mean differences have little influence on participation.

Panel B of Table 4 leads to similar findings. Approximately three fifths of the 29.4%

difference in participation between stanines 2 and 8 can be explained by group mean differences

in the control variables. This 18% difference in predicted participation rates is largely accounted

for by group differences in wealth (6%), education (5%), and income (5%), with the remainder

(2%) explained by group mean differences in all the other control variables.
  22

The decomposition has relevance for studies that lack the rich IQ data we have. Our

findings raise doubts about conclusions in such studies about the effect of wealth, income, or

education on participation; their effects cannot easily be disentangled from an omitted IQ

variable. By contrast, studies suggesting that age, marital status, or parental status influence

participation are less likely to have alternative interpretations related to IQ.

D. IQ’s Influence on the Participation of Females

The geographic location data, described earlier, identify 4,358 sisters of the males from

Table 2’s regression. Lacking data on female IQ because they do not serve in the FAF, we

substitute for the missing data. The regression specifications are identical to those in Table 2,

except that brother’s IQ stanine dummy or IQ score replaces the female’s missing IQ stanine

dummy or score. The IQ coefficients, reported in the Internet appendix, are of slightly smaller

magnitude than the comparable coefficients in Table 2, but remain statistically significant. For

example, in the linear specification, the IQ coefficient has a z-statistic of 4.75. This suggests that

the component of IQ that sisters share with brothers is a potent predictor of participation.

Substitution of sibling’s IQ for one’s own generates a biased estimate of the coefficient

on own IQ. This bias can over- or understate the effect of IQ on participation for the sisters, even

assuming that gender does not influence the relationship between the shared family component

of IQ and participation. The direction of the bias depends on the degree to which the family

component of IQ influences participation in comparison to the degree to which family IQ is a

noisy predictor of own IQ. We can assess the magnitude of this bias directly by repeating the

sibling analysis using 1,996 brother pairs. This alternative analysis yields a negligible difference
  23

(detailed in the Internet appendix) between the participation regression’s coefficient on one’s

brother’s IQ and that on own IQ.

E. Addressing Endogeneity Biases: Evidence from Sibling Control Function Regressions

The ability to match brothers offers a unique opportunity to address potential endogeneity

bias in Table 2’s results. In a setting with endogeneity, IQ’s effect on participation can be viewed

as estimation of a stylized pair of structural equations

participation(j) = β0 + β1*IQ(j) + β2*observed controls(j) +β3*unobservable controls(j) + e(j),

unobservable controls(j) = c0 + c1*IQ(j) + c2*observed controls(j) + z(j).

Inconsistent estimates of the vector β1 arise from the correlation between one’s actual IQ

and the unobservable controls. Following Heckman (1978, 1979), Rivers and Vuong (1988), and

Petrin and Train (2010), one corrects for the inconsistency by adding the control function

residual s(j), obtained from an OLS regression of own IQ on brother’s IQ, and own controls, i.e.,

IQ(j) = d0 + d1*IQ brother (j) +d2* observed controls (j) + s(j) (1)

to the first (probit-estimated) regression above. That is, estimation of

participation(j) = b0 + b1*IQ(j) + b2*observed controls(j) + b3*s(j)

+ b4*unobservable controls(j) + e(j)

leads to consistent estimates of β1 and β2 given by the transformation

βi = bi/sqrt(1+bi2*var(s))
  24

if the unobservable controls of subject j are uncorrelated with his brother’s IQ. (Here, var(s)

denotes the variance of the residual from equation (1).)

Table 5 reports these estimated βs. We use jackknife estimated test statistics to account

for the first-stage estimation error in s(j). The table also reports marginal effects, which are based

on the transformed coefficients. Table 5’s IQ coefficient for the linear specification,23 0.253, is

statistically significant, even though it is based on a far smaller sample than Table 2.

The key assumption of the control function method, that the residual be orthogonal to the

regressors, does not rule out inconsistent IQ coefficient estimates from all omitted variables.

However, if both the shared family IQ and idiosyncratic (non-family) IQ components have no

influence on participation, one would need a unique type of omitted variable to account for the

results in Table 5. Because brother’s IQ influences Table 5’s IQ coefficient, idiosyncratic

differences in propensities to cheat on exams, risk tolerance, financial literacy, or education

could not explain our results. There are differences between families in these dimensions, but

any component of these differences that is not accounted for by the other control variables in the

regression is likely to be small. Moreover, such a strange control variable could not explain IQ-

related differences between the participation decisions of brothers (which we now investigate).

F. Addressing Omitted Family Background Biases: Chamberlain’s Random Effects Regressions

Table 5 effectively substitutes brother’s IQ for own IQ to address endogeneity issues

arising from omitted idiosyncratic controls. The table’s significant IQ effect suggests that IQ

                                                            
23
This method can be used only with the linear-IQ specification; its first stage residual comes from linear projection.
  25

components that are shared within a family significantly influence participation. To control for

family effects, we now use Chamberlain’s (1980) random effects model to estimate participation

within families having at least one brother pair in our IQ subject sample.24 Such estimation

eliminates “within family” omitted variables, like shared knowledge about investments, as

potential explanations for IQ's effect on participation. Both Table 6 specifications demonstrate

that after controlling for family effects, IQ is a significant predictor of participation. This is a

powerful result. Education’s influence on participation does not survive this kind of test.25

III. The Effect of IQ on Sharpe Ratios and Risk

To study whether low-IQ subjects’ reluctance to participate stems from a more adverse

risk-return trade-off, Table 7 Panel A regresses Sharpe ratios, estimated from participants’ risky

portfolios of individual stocks and mutual funds, on IQ and controls. The Sharpe ratios we

compute employ investor-level data on the aggregate value of funds held. However, lacking data

on the specific funds held, we are forced into an assumption about fund composition—here, that

every fund is identical to the euro-denominated HEX portfolio index. From this assumption, it is

possible to derive each participant’s year 2001 time series of daily euro-denominated risky asset

portfolio returns, used to compute his Sharpe ratio denominator.26 Moreover, because estimating

the risk premia of stocks and funds is notoriously difficult, we require assumptions to compute a
                                                            
24
This model differs from standard random effects by allowing the family participation component to be linear
function of all regressors, evaluated at their family averages, and the random effects residual.
25
See Calvet and Sodini (2010).
26
These are the end-of-2000 unrebalanced portfolio-weighted daily returns of funds and every individual stock. To
adjust for thin trading, we compute portfolio variance as the sum of twice the serial covariance of this time series
and its average squared demeaned return.
  26

participant’s Sharpe ratio numerator—here, that an individual stock’s risk premium differs from

the HEX index (and fund) premium, but not from other stocks.27 The risk premium of the euro-

denominated HEX index (and thus mutual funds) is assumed to be 1.02 times Calvet, Campbell,

and Sodini’s (2007) 5.52% estimate for the dollar-denominated MSCI World Index risk

premium.28 Panel A studies IQ’s Sharpe ratio effect for a range of assumed risk premia for

individual stocks. Depending on the column, stocks’ risk premia can be 80%, 100%, or 120% of

the HEX premium. Note that the risk premium of the HEX proportionately scales up the risk

premium of all risky assets and thus has no effect on test statistics.

Panel A indicates that Sharpe ratios increase with IQ. The coefficients, monotonically

increasing for the most part, significantly differ from zero.29 For example, if stocks and funds

share identical risk premia, the difference in Sharpe ratios between the lowest and highest stanine

participants is -0.009 (t = -3.13). Panel A’s IQ coefficients also are similar to those obtained

from imputed Sharpe ratios using both the methodology and numbers suggested in Calvet,

Campbell, and Sodini (2009), which generate a stanine 1 coefficient of -0.011 (t = -2.77),30 a

figure that matches the 120% column’s corresponding coefficient in Panel A. The Panel A

coefficients also exhibit remarkable similarity across specifications of the risk premium; linear

                                                            
27
We later offer indirect evidence that heterogeneous stock risk premia, from factor exposure differences, strengthen
our results.
28
The HEX’s Scholes-Williams beta on the MSCI World Index is 1.02.
29
The Internet appendix indicates that this significance, as well as all other results in Table 7, extends to the linear-
IQ specification and to the 10% most affluent.
30
The number of stocks held and the fraction of risky assets invested in mutual funds entirely account for their
imputed Sharpe ratios. See
http://kuznets.fas.harvard.edu/~campbell/papers/swedishinvestorsappendix20070905.pdf. The full results for our
regression using their imputation methodology are in our Internet appendix.
  27

interpolation gives fairly accurate coefficient estimates for any other stock risk premium

assumption one might wish to impose. High-IQ investors’ superior Sharpe ratios thus arise

mostly from lower portfolio volatility. Table 7 Panel B’s first column, which regresses Panel A’s

Sharpe ratio denominator against IQ and the usual controls, confirms this.

To further analyze this Sharpe ratio component, the second and third columns of Table 7

Panel B report coefficients from OLS regressions of logged and non-logged stock component

variance on IQ and the usual controls. Panel B shows that logged total variance and total

variance of participants’ portfolios of stocks decrease sharply and significantly in IQ stanine.

With the (Internet appendix’s) linear-IQ specification for logged variance, a one-stanine increase

in IQ decreases variance by a highly significant 3.5% (t = 13.5).

If systematic risk is fully rewarded with higher average returns, Sharpe ratios are

primarily increased by reductions in diversifiable risk. To investigate whether IQ influences the

diversifiable risk of the stock component, Table 7 Panel C’s first column reports coefficients

from an OLS regression of the residual variance of each participant’s stock portfolio component

against IQ and the usual controls.31 Panel C’s lower residual variance for high-IQ investors’

portfolios suggests that high-IQ investors may also be more diversified. To directly investigate

diversification, Table 7 Panel C also studies the number of individual stocks in participants’

portfolios and whether participants own any mutual funds. Negative binomial regressions with

the IQ dummy specification show that cognitive skill increases the number of stocks held. Table

7 Panel C’s probit regression, analogous to Table 2, suggests that high IQ makes participants

                                                            
31
Residual variance is variance from Table 7 Panel B less systematic variance. Systematic variance is the product of
total variance from Table 7 Panel B times the R-squared from regressions of 2001 daily stock portfolio returns on
contemporaneous, lead, and lagged dollar MCSI World Index returns.
  28

more likely to hold mutual funds. Both findings are monotonic in IQ and significant.

Table 7 Panel D studies the systematic variance of investors’ stock portfolios. It indicates

that high-IQ investors’ one-factor systematic risk is lower.32 Panel D also reports coefficients

from regressions of portfolio beta (estimated against the dollar MSCI World Index), book-to-

market rank, and size rank of the stocks in each investor’s portfolio against the usual regressors.

IQ is significantly positively related to book-to-market exposure and negatively related to both

beta (explaining the lower systematic risk of high-IQ investors’ portfolio) and size.

Panel D’s systematic variance results have no influence on Panel A’s Sharpe ratio

numerators, which do not depend on the factor exposures of participants’ portfolios of individual

stocks. However, a large literature establishes that selecting high-beta stocks with low exposure

to the SMB and HML factors reduces ex-post Sharpe ratios. Table 7 shows that low-IQ investors

bear more risk, partly due to inferior diversification, and choose large growth stocks with high

betas—all of which arguably reduce the true Sharpe ratios of low-IQ participants’ portfolios.

In short, Table 7 documents that low-IQ participants are likely to experience a more

adverse risk-return trade-off than high-IQ participants. For equity portfolios with 30% per year

volatility, the stanine 1 coefficients from Panel A’s Sharpe ratio regressions, ranging from -0.007

to -0.011, amount to the lowest-IQ investors earning 21-33 basis points less per year than the

highest-IQ stanine. However, these figures probably underestimate the typical low-IQ investor’s

risk-return disadvantage. Because assessments measure IQ imprecisely, and thus generate an

errors-in-variables bias, Panel A’s IQ coefficients understate the impact of the IQ regressors.

                                                            
32
See the prior footnote for details. The similar results for IQ’s influence on three-factor systematic (Panel C) and
unsystematic risk (Panel D), using the HEX-index benchmark are detailed in the Internet appendix.
  29

Low-IQ investors, unlike their high-IQ counterparts, also shun Sharpe-ratio-enhancing factor

exposures; Panel A’s Sharpe ratio estimates do not account for differences in exposures to

factors like size and book-to-market. Finally, nonparticipants probably perceive an even worse

risk-return trade-off than the participants Table 7 studies. These considerations lend credence to

the conjecture that some nonparticipants opt out of the market because of a justifiable conviction

that the market’s risk-reward trade-off is unappealing.33 Table 7 suggests that this belief should

be more prevalent among low-IQ subjects.

IV. Conclusion

One’s IQ stanine, measured early in adult life, is monotonically related to participation

and diversification later in life. The high correlation between IQ and participation, which exists

even among the 10% most affluent individuals, controls for wealth, income, age, and other

demographic and occupational information. The economic size of the IQ effect is remarkably

large: Controlling for each subject’s observable characteristics, the participation rate for

individuals in the lowest-IQ stanine is 20.5% lower than what it is for individuals at the other end

of the IQ spectrum. IQ’s effect on participation is monotonic, far larger than the effect of income

on participation, and it generalizes to females. The importance of 120 questions from an IQ test

taken years before one decides whether to participate is remarkable, indeed.

Control function instrumentation of IQ with brothers’ scores does not alter our

conclusions about IQ and participation, suggesting that omitted variables bias does not account
                                                            
33
This idea is consistent with Campbell’s (2006) view that “Nonparticipating households may be aware of their
limited investment skill and may react by withdrawing from risky markets altogether.”
  30

for the IQ-participation relationship—at least for any omitted variable that is caused by own IQ.

Chamberlain (1980) random effects regressions for brother pairs also suggest that there is an

own-IQ effect on participation that is separate from a family effect. Moreover, if the IQ-

participation relationship arises from an omitted variables bias (or related specification errors),

IQ coefficient magnitudes from Table 2’s probit regressions should be far larger than the IQ

coefficients from these two bias-mitigating econometric techniques—but are not.

Cognitive skill’s correlation with participation has implications for the distribution of

wealth and policies that affect it. Because low-IQ investors participate less frequently in the

stock market, their savings tend to earn lower returns. Compounded over many years, this return

difference could contribute to the wealth gap between low- and high-IQ individuals to a greater

extent than wage differences. Moreover, governments often use privatization offerings with

incentives that encourage retail investors to subscribe.34 Because high-IQ investors

disproportionately reap the benefits of these incentives, privatization offerings may transfer

wealth from low-IQ to high-IQ individuals. Our findings also have relevance for what financial

economists have learned about markets. Because participants have higher IQ than the average

citizen, and thus are less likely to be noise traders, markets could be more efficient than what

experimental studies of the average citizen suggest.

Our paper makes some effort to understand IQ-related mechanisms that encourage or

deter participation. A statistical decomposition suggests that wealth, income, and education, all

influenced by IQ, are key contributors to participation. These results are consistent with IQ’s

correlation with indirect participation costs. Despite the promising start, the precise mechanism

                                                            
34
See Keloharju, Knüpfer, and Torstila (2008).
  31

by which IQ influences participation remains elusive. We document an IQ-participation effect

that is separate from the three major IQ channels found in the decomposition, as well as the more

minor effects of occupation that proxy for financial literacy. Finding additional variables that

might explain the separate IQ effect will be difficult. The paper’s control function analysis

implies that no unshared omitted variable could account for shared IQ’s effect on participation.

Chamberlain (1980) random effects regressions indicate that analyses of shared omitted variables

cannot explain own IQ’s effect on participation. This success in ruling out so many of the usual

suspects makes it challenging to identify the mechanism behind IQ’s influence on participation.

While we have not fully resolved the participation puzzle, there is the intriguing

possibility that the odds are stacked against low-IQ investors when they do participate in the

financial markets. Calvet, Campbell, and Sodini (2009) show that investors who make some

investment mistakes tend to make many of them. Grinblatt, Keloharju, and Linnainmaa (2010)

document that high-IQ investors’ stock purchases earn larger risk-adjusted returns, that their

purchases and sales experience lower trading costs, and that their trades are less subject to profit

eroding behavioral biases like the disposition effect. Grinblatt, Ikäheimo, and Keloharju (2007)

observe that high-IQ investors pay lower effective mutual fund fees by constructing “home-made

balanced funds,” i.e., portfolios of equity and bond funds. A companion explanation comes from

our last set of results. High-IQ investors are more likely to have larger Sharpe ratios because of

increased diversification (from holding mutual funds and greater numbers of stocks). They also

prefer Sharpe ratio enhancing factor exposures (from low beta, high book-to-market, and small

stocks). If low-IQ participants are likely to experience excess volatility because of poor

diversification or poor choice of factor exposures, low-IQ individuals may view participation’s

risk-return trade-off as being less favorable than the trade-off faced by high-IQ individuals.
  32

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  36

Figure 1: Distribution of IQ Score Conditional on Market Participation

Figure 1 plots IQ score distributions for stock market participants and nonparticipants. An
individual is a stock market participant if he held mutual funds or individual stocks registered
with the FCSD at the end of 2000.

25%
Market Participants
Nonparticipants

20%
Fraction of Individuals

15%

10%

5%

0%
Low 2 3 4 5 6 7 8 High
IQ Score
 
  37

Table 1

Descriptive statistics

Panel A reports the distribution of IQ scores. Panels B and C report mean values for variables
used in regression analyses. See the text for descriptions of the variables. Panel B reports means
sorted by participation and Panel C reports means sorted by IQ score. Participation is a dummy
variable that takes on the value one for subjects who held mutual funds or individual stocks
registered with the FCSD at the end of 2000. Income and wealth variables in Panel B are from
the 2000 Finnish tax dataset. Education variables are derived from the Finnish Census Data Set
using each individual’s age and zip code. Other demographic and occupation information are
from the tax data.

Panel A: Distribution of IQ score

IQ score
Sample 1 2 3 4 5 6 7 8 9 N
Theoretical Stanine Distribution 4.0% 7.0% 12.0% 17.0% 20.0% 17.0% 12.0% 7.0% 4.0%
Full IQ Score Data Set 5.2% 9.3% 9.5% 18.4% 21.0% 18.0% 9.1% 5.6% 3.8% 586,187
Uusimaa / East Uusimaa 3.5% 6.8% 7.6% 15.8% 21.0% 20.2% 11.4% 7.7% 6.0% 158,044

Panel B: Mean socioeconomic characteristics by stock market participation

Stock Market Participant

All No Yes
IQ 5.25 4.97 5.94
Education
Basic 21.6% 22.4% 19.6%
Vocational 42.6% 43.4% 40.8%
Matricular 18.8% 18.6% 19.5%
University 16.9% 15.6% 20.2%
Ordinary Income, EUR 22,642 19,901 29,604
Ordinary Income, Log-Growth 11.8% 11.5% 12.6%
Wealth
Taxable home wealth > 0 37.7% 31.7% 52.8%
Taxable forest wealth > 0 1.3% 1.0% 2.0%
Taxable foreign wealth > 0 0.0% 0.0% 0.1%
Taxable private equity > 0 2.6% 2.1% 3.8%
Taxable net worth, EUR 11,193 2,808 32,489
Other Demographics
Swedish 7.0% 6.3% 8.8%
Married 29.6% 27.7% 34.3%
Cohabiter 6.5% 6.9% 5.3%
Kids 29.8% 29.2% 31.5%
Occupation
Entrepreneur 2.8% 2.9% 2.6%
Farmer 0.9% 0.8% 1.3%
Finance professional 0.7% 0.3% 1.7%
Unemployed 8.6% 10.7% 3.2%
Number of observations 158,044 113,393 44,651
  38

Panel C: Mean socioeconomic characteristics by IQ score

IQ score
1 2 3 4 5 6 7 8 9 All
Stock Market Participant 9.8% 13.1% 16.6% 20.4% 26.3% 32.8% 37.9% 42.5% 46.5% 28.3%
Education
Basic 23.8% 23.6% 23.2% 22.9% 22.0% 21.2% 20.2% 19.5% 18.6% 21.6%
Vocational 47.5% 46.5% 45.9% 44.4% 43.1% 41.7% 40.3% 39.0% 37.2% 42.6%
Matricular 14.1% 15.1% 16.0% 17.3% 18.4% 19.6% 20.9% 22.1% 24.0% 18.8%
University 14.6% 14.8% 14.9% 15.3% 16.5% 17.5% 18.6% 19.5% 20.2% 16.9%
Ordinary Income, EUR 16,062 17,666 18,427 19,640 21,413 23,874 26,171 28,191 31,707 22,642
Ordinary Income, Log-Growth 7.1% 7.4% 8.3% 11.0% 11.5% 13.3% 13.4% 14.3% 16.1% 11.8%
Wealth
Taxable home wealth > 0 27.9% 31.4% 34.0% 34.8% 37.6% 40.1% 40.8% 42.1% 42.8% 37.7%
Taxable forest wealth > 0 1.2% 1.4% 1.2% 1.3% 1.3% 1.2% 1.2% 1.3% 1.4% 1.3%
Taxable foreign wealth > 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0%
Taxable private equity > 0 1.8% 2.1% 2.3% 2.4% 2.4% 2.8% 3.0% 3.0% 3.3% 2.6%
Taxable net worth, EUR 3,627 4,655 7,393 6,730 9,231 9,575 12,019 16,340 43,619 11,193
Other Demographics
Swedish 6.6% 7.4% 10.0% 5.9% 6.7% 6.9% 6.5% 6.9% 8.4% 7.0%
Married 22.5% 25.7% 25.8% 27.0% 29.3% 31.7% 32.0% 34.0% 33.2% 29.6%
Cohabiter 10.1% 10.0% 9.4% 8.0% 6.8% 5.3% 4.3% 3.7% 2.8% 6.5%
Kids 29.7% 32.0% 31.7% 30.5% 30.2% 29.8% 28.3% 28.5% 26.6% 29.8%
Occupation
Entrepreneur 3.2% 3.6% 3.2% 2.9% 2.7% 2.6% 2.4% 2.5% 2.6% 2.8%
Farmer 1.1% 1.1% 1.2% 0.9% 1.0% 0.8% 0.7% 0.7% 0.7% 0.9%
Finance professional 0.0% 0.1% 0.0% 0.2% 0.6% 0.9% 1.2% 1.7% 1.6% 0.7%
Unemployed 22.4% 16.7% 13.8% 11.3% 8.3% 6.0% 4.2% 3.4% 2.2% 8.6%
Number of observations 5,552 10,749 12,002 25,040 33,124 31,943 17,958 12,145 9,531 158,044

 
  39

Table 2

IQ Scores and Stock Market Participation

Table 2 reports summary data from probit regressions of stock market participation on IQ stanine
dummies (or IQ score) and a host of control variables (described in the body of the paper)
derived from the Finnish tax data and the Finnish census data set. Participation is a dummy
variable that takes on the value one for subjects who held mutual funds or individual stocks
registered with the FCSD at the end of 2000. Pseudo R-squared and sample sizes are reported at
the bottom of the table. Standard errors are clustered by zip code. For each of two specifications,
the columns report coefficients from the probit regression, associated z-values, and marginal
effects on participation probability (evaluated at the average value of other regressors, except for
IQ stanine dummies, which are evaluated at zero). The marginal effects for indicator variables
indicate the shift in the participation probability when the indicator variable changes from zero to
one. The dummy variable associated with the highest category—IQ stanine 9, university-level
education, highest ordinary income, and taxable net worth in the highest decile—are omitted and
serve as a benchmark. Taxable net worth deciles are computed after removing individuals with
no taxable net worth. A dummy variable, no net worth, identifies the latter individuals. The
regressions also contain 30 (unreported) cohort fixed effects for birth years 1953 through 1982.
  40

IQ Dummy Specification Linear-IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.090 41.84 0.028
Lowest -0.706 -24.71 -0.205
2 -0.580 -27.17 -0.177
3 -0.477 -21.49 -0.151
4 -0.369 -21.72 -0.121
5 -0.263 -15.64 -0.089
6 -0.149 -8.88 -0.052
7 -0.075 -4.35 -0.027
8 -0.023 -1.24 -0.008

Education
Basic -0.006 -5.66 -0.002 -0.006 -5.72 -0.002
Vocational -0.015 -14.27 -0.006 -0.015 -14.16 -0.005
Matricular 0.000 -0.04 0.000 0.000 -0.17 0.000

Ordinary income decile

No Income -0.359 -10.86 -0.119 -0.359 -10.86 -0.099
Lowest -0.494 -24.73 -0.160 -0.494 -24.70 -0.133
2 -0.561 -27.97 -0.179 -0.561 -27.94 -0.147
3 -0.555 -27.72 -0.177 -0.556 -27.75 -0.146
4 -0.595 -35.23 -0.188 -0.596 -35.09 -0.155
5 -0.601 -33.72 -0.189 -0.602 -33.78 -0.156
6 -0.523 -28.51 -0.169 -0.523 -28.52 -0.139
7 -0.427 -25.46 -0.141 -0.425 -25.32 -0.117
8 -0.324 -19.03 -0.110 -0.321 -18.96 -0.092
9 -0.167 -10.38 -0.059 -0.164 -10.19 -0.049
Income Log-Growth Rate 0.027 3.65 0.010 0.027 3.64 0.009

Wealth dummies by wealth type

Housing 0.149 13.61 0.054 0.149 13.69 0.048
Forest -0.085 -1.85 -0.030 -0.085 -1.86 -0.026
Private equity -0.173 -7.54 -0.060 -0.174 -7.56 -0.052
Foreign assets excluding equity 0.319 1.34 0.122 0.321 1.36 0.111
Net Worth decile
No Net Worth -1.640 -49.53 -0.588 -1.638 -49.30 -0.570
Lowest -0.215 -5.42 -0.074 -0.212 -5.33 -0.062
2 -0.405 -10.99 -0.132 -0.404 -10.91 -0.109
3 -0.588 -16.95 -0.181 -0.587 -16.88 -0.147
4 -0.698 -19.47 -0.206 -0.698 -19.44 -0.166
5 -0.738 -21.98 -0.215 -0.736 -21.86 -0.172
6 -0.712 -20.70 -0.209 -0.711 -20.55 -0.168
7 -0.677 -18.87 -0.201 -0.676 -18.80 -0.162
8 -0.574 -16.61 -0.177 -0.574 -16.60 -0.144
9 -0.394 -12.21 -0.129 -0.393 -12.13 -0.107

Other demographics
Swedish speaker 0.151 7.83 0.056 0.148 7.72 0.049
Married 0.023 1.45 0.008 0.023 1.44 0.007
Cohabitor 0.029 1.22 0.011 0.027 1.14 0.009
Kids -0.138 -8.23 -0.049 -0.137 -8.18 -0.042
Occupation
Entrepreneur -0.230 -8.77 -0.079 -0.232 -8.84 -0.067
Farmer -0.182 -3.20 -0.063 -0.183 -3.21 -0.054
Finance professional 0.439 9.29 0.170 0.439 9.27 0.156
Unemployed -0.334 -20.68 -0.113 -0.336 -20.79 -0.095
Cohort Fixed Effects Yes Yes
Baseline probability 0.332 0.246
Wald-χ2 (IQ1 = … = IQ8 = 0) 1,912.5
Pseudo R-squared 0.211 0.210
 N 158,044 158,044  
  41

Table 3

IQ Scores and Stock Market Participation of Affluent Individuals

Table 3 reports summary data from probit regressions of stock market participation on IQ stanine
dummies (or IQ score) and a host of control variables (described in the body of the paper)
derived from the Finnish tax data and the Finnish census data set. The sample is restricted to the
10% most affluent individuals in the data set. Panel A restricts the sample to the 10% of
individuals with the largest ordinary income for 2000 as reported on their tax returns. Panel B
restricts the sample to the 10% of individuals with the largest taxable net worth as reported on
their year 2000 tax returns. Participation is a dummy variable that takes on the value one for
subjects who held mutual funds or individual stocks registered with the FCSD at the end of 2000.
Pseudo R-squared and sample sizes are reported at the bottom of the table. Standard errors are
clustered by zip code. For each of two specifications, the columns report coefficients from the
probit regression, associated z-values, and marginal effects on participation probability
(evaluated at the average value of other regressors, except for IQ stanine dummies, which are
evaluated at zero). The marginal effects for indicator variables indicate the shift in the
participation probability when the indicator variable changes from zero to one. The dummy
variable associated with the highest category—IQ stanine 9, university-level education, highest
ordinary income, and taxable net worth in the highest decile—are omitted and serve as a
benchmark. Taxable net worth deciles are computed after removing individuals with no taxable
net worth. A dummy variable, no net worth, identifies the latter individuals. The regressions also
contain 30 (unreported) cohort fixed effects for birth years 1953 through 1982.
  42

Panel A: Ordinary Income in Top 10% of the Distribution   

IQ Dummy Specification Linear-IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.059 8.00 0.023
Lowest -0.396 -2.45 -0.157
2 -0.708 -6.48 -0.275
3 -0.372 -4.58 -0.147
4 -0.273 -5.11 -0.108
5 -0.164 -4.11 -0.064
6 -0.046 -1.16 -0.018
7 -0.066 -1.71 -0.026
8 -0.008 -0.19 -0.003

Education
Basic -0.004 -1.37 -0.001 -0.004 -1.35 -0.002
Vocational -0.015 -6.26 -0.006 -0.015 -6.22 -0.006
Matricular -0.001 -0.25 0.000 -0.001 -0.19 0.000
Income Log-Growth Rate 0.060 1.44 0.023 0.053 1.27 0.021
Wealth dummies by wealth type
Housing 0.188 7.45 0.073 0.188 7.47 0.075
Forest -0.024 -0.23 -0.009 -0.025 -0.24 -0.010
Private equity -0.045 -0.82 -0.018 -0.049 -0.90 -0.020
Foreign assets excluding equity 0.901 1.70 0.280 0.915 1.75 0.299
Net Worth decile
No Net Worth -1.311 -24.58 -0.467 -1.304 -24.43 -0.475
Lowest -0.779 -8.84 -0.300 -0.772 -8.78 -0.293
2 -0.692 -7.45 -0.269 -0.696 -7.45 -0.267
3 -0.729 -8.21 -0.283 -0.724 -8.16 -0.277
4 -0.823 -9.03 -0.316 -0.812 -8.95 -0.307
5 -0.798 -11.67 -0.307 -0.791 -11.57 -0.300
6 -0.710 -9.15 -0.276 -0.704 -9.04 -0.271
7 -0.680 -8.69 -0.265 -0.672 -8.58 -0.260
8 -0.542 -7.97 -0.214 -0.537 -7.89 -0.211
9 -0.379 -5.95 -0.150 -0.374 -5.83 -0.148

Other demographics
Swedish speaker 0.138 3.00 0.053 0.131 2.84 0.051
Married -0.010 -0.28 -0.004 -0.008 -0.23 -0.003
Cohabitor 0.080 1.39 0.031 0.074 1.28 0.029
Kids -0.154 -4.27 -0.059 -0.152 -4.23 -0.060
Occupation
Entrepreneur -0.202 -3.79 -0.080 -0.221 -4.23 -0.088
Farmer -0.092 -0.66 -0.036 -0.099 -0.71 -0.039
Finance professional 0.347 5.94 0.128 0.350 5.99 0.133
Unemployed -0.116 -0.52 -0.046 -0.116 -0.52 -0.046
Cohort Fixed Effects Yes Yes

Baseline probability 0.591 0.555

Wald-χ2 (IQ1 = … = IQ8 = 0) 93.0
Pseudo R-squared 0.111 0.109
N 15,413 15,413
  43

Panel B: Net Worth in Top 10% of the Distribution

IQ Dummy Specification Linear-IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.094 6.70 0.023
Lowest -0.826 -4.27 -0.225
2 -0.628 -4.30 -0.157
3 -0.496 -3.74 -0.117
4 -0.595 -4.97 -0.147
5 -0.305 -2.96 -0.065
6 -0.250 -2.47 -0.051
7 -0.248 -2.33 -0.051
8 -0.088 -0.67 -0.016

Education
Basic -0.003 -0.55 0.000 -0.003 -0.60 -0.001
Vocational -0.025 -5.81 -0.004 -0.025 -5.79 -0.006
Matricular 0.003 0.37 0.001 0.003 0.40 0.001

Ordinary income decile

No Income -0.013 -0.08 -0.002 -0.014 -0.09 -0.003
Lowest 0.131 0.97 0.021 0.120 0.89 0.028
2 -0.189 -1.48 -0.037 -0.188 -1.47 -0.049
3 -0.246 -2.10 -0.050 -0.245 -2.10 -0.066
4 -0.221 -2.02 -0.044 -0.217 -1.97 -0.058
5 -0.261 -2.34 -0.053 -0.271 -2.44 -0.073
6 -0.291 -2.54 -0.060 -0.290 -2.54 -0.079
7 -0.241 -2.14 -0.048 -0.246 -2.21 -0.066
8 -0.132 -1.35 -0.025 -0.130 -1.35 -0.033
9 -0.091 -1.09 -0.017 -0.096 -1.15 -0.024
Income Log-Growth Rate 0.009 0.23 0.002 0.010 0.25 0.002
Wealth dummies by wealth type
Housing -0.109 -1.04 -0.018 -0.110 -1.06 -0.026
Forest 0.130 1.03 0.022 0.131 1.04 0.030
Private equity -0.070 -0.85 -0.013 -0.070 -0.85 -0.017
Foreign assets excluding equity -0.291 -0.79 -0.061 -0.274 -0.74 -0.075
Other demographics
Swedish speaker 0.153 2.22 0.025 0.160 2.34 0.037
Married 0.080 0.87 0.014 0.080 0.88 0.019
Cohabitor 0.160 1.16 0.026 0.167 1.21 0.037
Kids -0.286 -3.05 -0.051 -0.287 -3.08 -0.070
Occupation
Entrepreneur -0.137 -1.16 -0.026 -0.138 -1.18 -0.035
Farmer -0.420 -3.13 -0.090 -0.419 -3.14 -0.117
Finance professional 0.781 2.95 0.084 0.778 2.93 0.124
Unemployed 0.091 0.52 0.015 0.087 0.50 0.020
Cohort Fixed Effects Yes Yes

Baseline probability 0.899 0.842

Wald-χ2 (IQ1 = … = IQ8 = 0) 49.6
Pseudo R-squared 0.144 0.142
N 3,857 3,857
  44

Table 4

Fairlie-Blinder-Oaxaca Decomposition of the Secondary Effects of IQ on Stock Market

Participation

Table 4 reports on a Fairlie-Blinder-Oaxaca decomposition. This analysis measures how much of

the difference in high- and low-IQ individuals’ stock market participation rates at the end of
2000 can be explained by differences in control variables such as education, income, and wealth.
We first estimate a probit regression of a stock market participation dummy against all control
variables, omitting the IQ regressor(s). We save the z-scores from this regression and translate
them into predicted participation rates for different IQ groups. The decomposition technique
computes the marginal effect of group mean differences for seven natural collections of the
control variables. For a given stanine pairing, marginal effects are the sequence of changes in
predicted participation rates obtained by sequentially changing each control variable’s value
from its group mean at the lower stanine to its mean at the higher stanine. Sequencing of the
changes in the control variables are randomized, repeated, and averaged, and members are paired
across the two stanines, to obtain marginal changes in participation rates and test statistics. Panel
A reports on an analysis of participation rate differences between stanines 1 and 9. Panel B
reports on stanines 2 and 8.
  45

Panel A: Decomposition Estimates for IQ 1 versus IQ 9 Individuals

Decomposition
Estimate, % z-value
Education 6.03 48.1
Income 5.70 52.1
Asset Class Ownership 0.58 14.0
Wealth 8.29 131.2
Demographics 0.29 7.0
Profession and Unemployment 1.83 28.5
Cohort 0.61 7.8

IQ=1 Participation Rate 9.80

IQ=9 Participation Rate 46.52
Explained Difference in Participation Rates 23.33
Unexplained Difference in Participation Rates 13.39

Panel B: Decomposition Estimates for IQ 2 versus IQ 8 Individuals

Decomposition
Estimate, % z-value
Education 4.57 47.6
Income 4.92 51.0
Asset Class Ownership 0.42 14.4
Wealth 5.99 135.4
Demographics 0.20 6.0
Profession and Unemployment 1.32 29.6
Cohort 0.44 7.7

IQ=2 Participation Rate 13.07

IQ=8 Participation Rate 42.52
Explained Difference in Participation Rates 17.88
Unexplained Difference in Participation Rates 11.57
  46

Table 5

Stock Market Participation Decisions using a Control Function Approach to Estimation

Table 5 reports on a probit regression of stock market participation on a person’s own IQ score, a
host of control variables (described in the body of the paper) derived from the Finnish tax data
and the Finnish census data set, and a residual from a first-stage OLS regression of one’s own IQ
score against his brother’s IQ score and the control variables. The inclusion of the residual
controls for an endogeneity problem that would arise if some unobservable controls were
correlated with one’s own IQ score. We identify 1,996 pairs of brothers using historical
addresses and move-in and move-out dates for each subject in the Finnish tax data. Two males
are identified as brothers if they lived together as children at the same address at the same time or
moved at the same time. We also use transitivity to establish a sibling pair as described in the
body of the paper. Participation is a dummy variable that takes on the value one for subjects who
held mutual funds or individual stocks registered with the FCSD at the end of 2000. Pseudo R-
squared and sample sizes are reported at the bottom of the table. Columns report coefficients
from the probit regression, associated jackknife-estimated z-values, and marginal effects on
participation probability (evaluated at the average value of the regressors). The dummy variable
associated with the highest category—university-level education, highest ordinary income, and
taxable net worth in the highest decile—are omitted and serve as a benchmark. Taxable net
worth deciles are computed after removing individuals with no taxable net worth. A dummy
variable, no net worth, identifies the latter individuals. The regressions also contain 30
(unreported) cohort fixed effects for birth years 1953 through 1982.
  47

Marginal
Independent variables Coefficients z -values Effects
IQ stanine 0.253 5.21 0.048
Education
Basic 0.000 0.00 0.001
Vocational -0.019 -2.45 -0.004
Matricular 0.002 0.22 0.000
Ordinary income decile
No Income 0.092 0.49 0.036
Lowest 0.370 1.58 0.115
2 -0.247 -1.20 -0.021
3 -0.241 -1.34 -0.004
4 -0.238 -1.43 -0.005
5 -0.284 -2.08 -0.045
6 -0.106 -0.81 0.006
7 -0.233 -2.09 -0.028
8 -0.234 -2.17 -0.030
9 -0.222 -2.17 -0.024
Income Log-Growth Rate 0.037 0.86 0.002
Wealth dummies by wealth type
Housing -0.282 -2.18 -0.017
Forest -1.344 -2.37 -0.200
Private equity -0.706 -2.66 -0.032
Foreign assets excluding equity
Net Worth decile
No Net Worth -2.238 -10.73 -0.352
Lowest 0.506 0.73 -0.213
2 0.891 3.45 -0.162
3 0.062 0.19 -0.178
4 0.288 0.81 -0.186
5 0.146 0.49 -0.185
6 -0.243 -0.90 -0.167
7 -0.197 -0.82 -0.129
8 -0.367 -1.49 -0.089
9 -0.550 -2.50 -0.079
Other demographics
Swedish speaker 0.407 4.04 0.034
Married -0.087 -0.32 -0.017
Cohabitor 0.280 0.44 0.015
Kids -0.430 -0.77 -0.050
Occupation
Entrepreneur -0.553 -1.49 -0.023
Farmer 0.279 0.43 0.063
Finance professional 0.870 1.05 0.033
Unemployed -0.412 -2.72 -0.082
st
1 Stage Control Variable -0.176 -3.39 -0.033
Cohort Fixed Effects Yes

Baseline probability 0.110

Pseudo R-squared 0.269
N 3,992
  48

Table 6

Chamberlain Random Effects Analysis of Brothers’ Stock Market Participation Decisions

Table 6 reports summary data from probit regressions of stock market participation on IQ scores
and a host of control variables (described in the body of the paper) derived from the Finnish tax
data and the Finnish census data set. Participation is a dummy variable that takes on the value
one for subjects who held mutual funds or individual stocks registered with the FCSD at the end
of 2000. The regressions are estimated using data on 1,996 brother pairs for whom we have both
IQ scores and all control variables. Two males are identified as brothers if they lived together as
children at the same address at the same time or moved at the same time. We also use transitivity
to establish a sibling pair as described in the body of the paper. The data control for unobserved
family background variables with Chamberlain’s (1980) random effects model. Pseudo R-
squared and sample sizes are reported at the bottom of the table. Standard errors are clustered by
zip code. For each of two specifications, the columns report coefficients from the probit
regression and associated z-values. The dummy variable associated with the highest category—
IQ stanine 9, university-level education, highest ordinary income, and taxable net worth in the
highest decile—are omitted and serve as a benchmark. Taxable net worth deciles are computed
after removing individuals with no taxable net worth. A dummy variable, no net worth, identifies
the latter individuals. The regressions also contain 30 (unreported) cohort fixed effects for birth
years 1953 through 1982.
  49

IQ Dummy Specification Linear-IQ Specification

Independent variables Coefficients z -values Coefficients z -values

IQ stanine 0.130 4.54
Lowest -1.041 -2.62
2 -0.599 -1.89
3 -0.501 -1.77
4 -0.530 -2.27
5 -0.121 -0.56
6 0.123 0.58
7 -0.101 -0.44
8 0.278 1.12

Education
Basic -0.011 -0.80 -0.010 -0.73
Vocational -0.047 -3.53 -0.045 -3.51
Matricular -0.003 -0.25 -0.003 -0.24
Ordinary income decile
No Income 0.449 1.28 0.471 1.37
Lowest 0.669 1.69 0.645 1.65
2 -0.217 -0.61 -0.221 -0.63
3 -0.214 -0.72 -0.178 -0.61
4 -0.277 -1.05 -0.254 -0.98
5 -0.091 -0.40 -0.069 -0.31
6 0.048 0.22 0.038 0.18
7 -0.148 -0.78 -0.137 -0.74
8 -0.313 -1.78 -0.305 -1.75
9 -0.249 -1.51 -0.243 -1.50
Income Log-Growth Rate 0.108 1.38 0.108 1.40

Wealth dummies by wealth type

Housing -1.866 -2.00 -1.885 -2.05
Forest -1.381 -2.99 -1.352 -2.98
Private equity -3.790 -10.62 -3.709 -10.67
Foreign assets excluding equity

Net Worth decile

No Net Worth 0.963 1.43 0.941 1.41
Lowest 1.854 1.94 1.877 1.98
2 0.245 0.42 0.288 0.50
3 0.992 1.63 0.975 1.65
4 0.558 1.03 0.613 1.15
5 -0.061 -0.13 -0.100 -0.22
6 -0.102 -0.25 -0.088 -0.22
7 -0.454 -1.09 -0.428 -1.04
8 -0.722 -1.88 -0.748 -1.98
9 0.642 3.33 0.630 3.32

Other demographics
Swedish speaker
Married 0.138 0.32 0.090 0.21
Cohabitor 0.977 1.04 0.821 0.89
Kids -0.793 -0.99 -0.703 -0.90
Occupation
Entrepreneur -1.165 -2.31 -1.107 -2.24
Farmer 0.207 0.25 0.348 0.42
Finance professional 1.973 1.73 1.855 1.66
Unemployed -0.748 -2.75 -0.746 -2.79
Cohort Fixed Effects Yes Yes
2
Wald-χ (IQ1 = … = IQ8 = 0) 30.5
N 3,766 3,766
  50

Table 7

Sharpe Ratios, Portfolio Variance, Diversification, and Factor Exposures

Table 7 reports coefficients and test statistics from regressions of portfolio attributes on IQ
scores and a host of control variables (described in the body of the paper). The dependent
variables are (a) for Panel A, estimated with OLS, three parameterizations of estimated Sharpe
ratio for the portfolio the subject held at the end of 2000 (described in the body of the paper); (b)
for Panel B, estimated with OLS, the standard deviation denominator of Panel A, as well as the
logged return variance and variance of the stock portfolio, computed using year 2001 daily data;
(c) for Panel C, estimated with OLS, negative binomial, and probit, respectively, the one-factor
dollar MSCI World Index market model residual variance, the number of stocks the subject held
at the end of 2000, and a dummy variable that takes on the value one for subjects who held
mutual funds at the end of 2000; and (d) for Panel D, estimated with OLS, the one-factor dollar
MSCI World Index market model systematic variance, as well as Scholes-Williams MSCI beta
(from year 2001 daily data), end-of-2000 size percentile divided by 100, and book-to-market
percentile divided by 100. All regressions use data on individuals who held mutual funds or
stocks registered with the FCSD at the end of 2000. R-squared and sample size are reported at
the bottom of each panel. Standard errors are clustered by zip code. Panel C’s marginal effects
are evaluated at the average value of other regressors, except for IQ stanine dummies, which are
evaluated at zero. The dummy variable associated with the highest category—IQ stanine 9,
university-level education, highest ordinary income decile, and taxable net worth in the highest
decile—are omitted and serve as a benchmark. Taxable net worth deciles are computed after
removing individuals with no taxable net worth. A dummy variable, no net worth, identifies the
latter individuals. The regressions also contain 30 (unreported) cohort fixed effects for birth
years 1953 through 1982.
  51

Panel A: Sharpe Ratios

Sharpe Ratio
Coefficients t -values
Stock Risk Premium / Fund Risk Premium Stock Risk Premium / Fund Risk Premium
Independent variables 80% 100% 120% 80% 100% 120%
IQ stanine
Lowest -0.007 -0.009 -0.011 -2.42 -3.13 -3.76
2 -0.005 -0.007 -0.010 -2.45 -3.71 -4.96
3 -0.011 -0.013 -0.014 -6.54 -7.47 -8.14
4 -0.005 -0.006 -0.008 -3.51 -4.63 -5.63
5 -0.005 -0.006 -0.007 -4.24 -5.01 -5.62
6 -0.004 -0.005 -0.006 -3.51 -4.10 -4.56
7 -0.002 -0.003 -0.003 -1.94 -2.18 -2.34
8 -0.002 -0.002 -0.003 -1.81 -2.03 -2.16

Education
Basic 0.000 0.000 0.000 -2.03 -2.53 -2.94
Vocational 0.000 0.000 0.000 2.78 2.01 1.22
Matricular 0.000 0.000 0.000 -3.92 -4.40 -4.37

Ordinary income decile

No Income 0.004 0.008 0.012 1.72 3.24 4.60
Lowest -0.004 0.000 0.004 -2.41 0.11 2.45
2 -0.002 0.001 0.005 -0.97 0.89 2.70
3 -0.002 0.000 0.003 -1.21 0.20 1.57
4 -0.001 0.001 0.002 -0.37 0.56 1.46
5 0.001 0.001 0.002 0.38 0.92 1.46
6 0.001 0.002 0.003 1.14 1.67 2.15
7 0.001 0.002 0.003 1.15 1.79 2.38
8 0.000 0.000 0.001 -0.36 0.10 0.54
9 -0.001 -0.001 0.000 -1.18 -0.82 -0.45
Income Log-Growth Rate 0.002 0.002 0.003 3.14 3.73 4.12

Wealth dummies by wealth type

Housing -0.005 -0.004 -0.004 -6.73 -6.08 -5.16
Forest 0.005 0.006 0.007 1.54 1.88 2.14
Private equity -0.001 0.000 0.001 -0.72 0.06 0.76
Foreign assets excluding equity 0.000 0.006 0.011 -0.01 0.46 0.79

Net Worth decile

No Net Worth -0.019 -0.022 -0.025 -13.21 -14.03 -14.39
Lowest 0.024 0.014 0.004 11.21 6.65 1.97
2 0.002 -0.005 -0.011 1.13 -2.42 -5.73
3 0.002 -0.003 -0.008 1.28 -1.46 -4.04
4 -0.003 -0.006 -0.010 -1.50 -3.62 -5.55
5 -0.004 -0.007 -0.010 -1.91 -3.50 -4.87
6 -0.009 -0.011 -0.014 -4.58 -5.72 -6.57
7 -0.011 -0.013 -0.015 -6.15 -6.92 -7.39
8 -0.008 -0.010 -0.012 -4.71 -5.62 -6.22
9 -0.005 -0.006 -0.008 -2.76 -3.44 -3.95
Other demographics
Swedish speaker 0.016 0.015 0.013 11.04 10.71 10.09
Married 0.001 0.001 0.001 1.22 1.10 0.95
Cohabitor 0.000 0.000 -0.001 0.02 -0.19 -0.40
Kids -0.004 -0.003 -0.002 -3.13 -2.42 -1.65

Occupation
Entrepreneur -0.024 -0.020 -0.016 -21.09 -15.51 -10.92
Farmer -0.015 -0.014 -0.012 -4.35 -3.64 -2.92
Finance professional 0.005 0.005 0.005 1.91 1.96 1.95
Unemployed 0.002 0.002 0.001 1.36 1.11 0.83

Cohort Fixed Effects Yes Yes Yes

Wald-χ2 (IQ1 = … = IQ8 = 0) 6.7 9.4 12.0

Adjusted R-squared 0.074 0.064 0.055
N 44,592 44,592 44,592  
  52

Panel B: Portfolio Variance

Coefficients t -values
Total Total
portfolio Stock portfolio variance portfolio Stock portfolio variance
Independent variables volatility log(σ2) σ2 volatility log(σ2) σ2
IQ stanine
Lowest 0.032 0.255 0.052 3.17 6.51 4.32
2 0.025 0.227 0.046 3.54 8.89 5.30
3 0.044 0.241 0.053 6.74 10.25 6.62
4 0.024 0.170 0.041 4.72 9.28 6.34
5 0.024 0.146 0.036 4.87 8.02 5.64
6 0.015 0.102 0.022 3.55 6.28 4.11
7 0.009 0.052 0.010 1.91 2.94 1.56
8 0.005 0.043 0.004 1.13 2.51 0.65

Education
Basic 0.001 0.003 0.001 2.36 3.22 2.19
Vocational 0.000 0.001 0.001 -1.44 1.40 1.55
Matricular 0.001 0.004 0.001 4.26 3.04 2.31

Ordinary income decile

No Income -0.042 -0.206 -0.062 -4.55 -5.60 -4.79
Lowest -0.019 -0.139 -0.056 -2.81 -4.96 -5.66
2 -0.020 -0.119 -0.050 -3.01 -4.69 -5.02
3 -0.013 -0.064 -0.031 -2.05 -2.74 -3.80
4 -0.013 -0.030 -0.025 -2.50 -1.43 -3.42
5 -0.012 0.004 -0.016 -2.55 0.24 -2.61
6 -0.014 -0.008 -0.018 -3.10 -0.48 -3.07
7 -0.016 -0.020 -0.022 -3.84 -1.19 -3.66
8 -0.005 -0.001 -0.011 -1.28 -0.09 -1.82
9 0.000 0.017 -0.002 -0.05 1.15 -0.37
Income Log-Growth Rate -0.008 -0.042 -0.009 -3.59 -4.61 -3.05

Wealth dummies by wealth type

Housing 0.014 0.038 0.010 5.05 4.13 2.79
Forest -0.015 -0.070 -0.012 -1.27 -1.63 -0.86
Private equity 0.001 -0.047 -0.009 0.25 -2.25 -1.36
Foreign assets excluding equity -0.031 -0.167 -0.060 -0.93 -1.08 -1.91

Net Worth decile

No Net Worth 0.083 0.433 0.112 16.38 20.34 18.48
Lowest -0.028 0.320 0.079 -4.06 9.42 7.58
2 0.025 0.369 0.086 3.78 13.97 10.63
3 0.007 0.216 0.036 1.19 8.76 4.83
4 0.022 0.213 0.046 3.75 8.34 6.17
5 0.023 0.208 0.042 3.76 7.80 5.57
6 0.035 0.223 0.047 4.96 8.15 5.34
7 0.041 0.244 0.049 6.37 8.98 6.24
8 0.029 0.176 0.031 4.92 6.92 4.54
9 0.018 0.110 0.020 2.87 4.24 2.73
Other demographics
Swedish speaker -0.051 -0.118 -0.037 -11.85 -6.79 -6.83
Married -0.005 -0.021 -0.007 -1.24 -1.25 -1.37
Cohabitor 0.003 0.010 0.003 0.41 0.39 0.40
Kids 0.009 0.018 0.005 2.03 1.03 0.82

Occupation
Entrepreneur 0.063 0.099 0.025 10.81 4.87 3.38
Farmer 0.037 0.096 0.018 2.68 1.75 1.10
Finance professional -0.018 -0.081 -0.019 -1.97 -1.95 -1.56
Unemployed 0.002 0.041 0.019 0.28 1.57 2.15

Cohort Fixed Effects Yes Yes Yes

Wald-χ2 (IQ1 = … = IQ8 = 0) 9.5 26.7 14.3

Adjusted R-squared 0.052 0.058 0.036
N 44,592 36,359 36,359  
  53

Panel C: Portfolio Diversification

log(σe2) Number of Stocks Held Decision to Own Mutual Funds
Marginal Marginal
Independent variables Coefficients z -values Coefficients z -values Effects Coefficients z -values Effects
IQ stanine
Lowest 0.274 6.86 -0.321 -5.98 -0.630 -0.138 -2.28 -0.049
2 0.245 9.37 -0.338 -9.06 -0.659 -0.115 -2.45 -0.041
3 0.258 10.73 -0.287 -9.38 -0.573 -0.209 -5.01 -0.074
4 0.181 9.62 -0.191 -9.15 -0.399 -0.080 -2.66 -0.029
5 0.155 8.22 -0.138 -7.47 -0.296 -0.102 -4.00 -0.037
6 0.106 6.34 -0.061 -3.35 -0.136 -0.070 -2.93 -0.026
7 0.053 2.94 -0.063 -2.82 -0.139 -0.057 -2.15 -0.021
8 0.044 2.52 -0.024 -1.21 -0.055 -0.031 -1.22 -0.012

Education
Basic 0.004 3.31 -0.004 -3.20 -0.009 0.001 0.57 0.000
Vocational 0.002 1.81 -0.008 -6.80 -0.019 0.003 2.57 0.001
Matricular 0.004 3.00 -0.001 -0.38 -0.002 -0.001 -0.73 0.000

Ordinary income decile

No Income -0.192 -5.07 0.000 0.00 0.000 -0.226 -3.93 -0.080
Lowest -0.122 -4.25 -0.063 -2.51 -0.142 -0.430 -11.60 -0.145
2 -0.101 -3.73 -0.145 -6.06 -0.313 -0.358 -9.53 -0.123
3 -0.046 -1.91 -0.181 -6.86 -0.386 -0.291 -8.22 -0.101
4 -0.007 -0.32 -0.255 -11.20 -0.525 -0.265 -8.15 -0.093
5 0.025 1.37 -0.270 -10.23 -0.553 -0.181 -5.70 -0.065
6 0.013 0.75 -0.281 -11.62 -0.574 -0.140 -4.74 -0.051
7 -0.002 -0.14 -0.217 -9.15 -0.456 -0.127 -4.48 -0.046
8 0.014 0.85 -0.138 -6.85 -0.301 -0.109 -4.23 -0.040
9 0.029 1.98 -0.108 -6.74 -0.240 -0.091 -3.94 -0.033
Income Log-Growth Rate -0.042 -4.57 0.014 1.22 0.032 0.012 0.89 0.005

Wealth dummies by wealth type

Housing 0.048 5.06 -0.007 -0.56 -0.017 -0.106 -6.29 -0.039
Forest -0.058 -1.32 -0.027 -0.53 -0.061 -0.068 -0.87 -0.025
Private equity -0.044 -2.08 0.091 2.86 0.218 -0.084 -2.57 -0.031
Foreign assets excluding equity -0.159 -1.06 0.136 0.92 0.335 -0.167 -0.59 -0.059

Net Worth decile

No Net Worth 0.511 22.97 -1.092 -49.83 -2.540 -0.636 -21.57 -0.230
Lowest 0.384 11.00 -1.560 -44.87 -1.990 0.489 11.98 0.190
2 0.429 15.67 -1.237 -42.07 -1.743 0.004 0.12 0.002
3 0.258 10.26 -0.987 -35.31 -1.512 0.013 0.36 0.005
4 0.252 9.31 -0.825 -25.88 -1.340 -0.109 -2.78 -0.040
5 0.252 9.16 -0.793 -25.59 -1.304 -0.172 -4.47 -0.061
6 0.266 9.49 -0.683 -25.92 -1.172 -0.245 -6.27 -0.086
7 0.288 10.37 -0.680 -21.76 -1.171 -0.321 -8.36 -0.110
8 0.209 7.93 -0.546 -19.15 -0.994 -0.236 -5.66 -0.083
9 0.129 4.79 -0.419 -15.78 -0.805 -0.176 -5.05 -0.063
Other demographics
Swedish speaker -0.125 -7.14 -0.031 -1.41 -0.071 0.320 12.19 0.123
Married -0.021 -1.26 -0.054 -2.95 -0.122 0.029 1.22 0.011
Cohabitor 0.008 0.31 0.015 0.53 0.035 0.044 1.11 0.017
Kids 0.027 1.54 -0.065 -3.46 -0.147 -0.173 -6.34 -0.063

Occupation
Entrepreneur 0.120 5.91 0.082 3.02 0.194 -1.612 -19.07 -0.338
Farmer 0.132 2.37 -0.008 -0.12 -0.019 -0.590 -6.01 -0.185
Finance professional -0.099 -2.38 0.233 6.66 0.601 0.250 5.44 0.096
Unemployed 0.043 1.65 -0.014 -0.43 -0.033 0.006 0.17 0.002

Cohort Fixed Effects Yes Yes Yes

Baseline No. of Stocks / Prob. 2.295 0.347

Wald-χ2 (IQ1 = … = IQ8 = 0) 29.6 227.6 41.2
Adjusted/Pseudo R-squared 0.069 0.082
N 36,359 44,592 44,592  
  54

Panel D: Systematic Risk

Coefficients t -values
Independent variables log(σm2) Beta Size Rank B/M Rank log(σm2) Beta Size Rank B/M Rank
IQ stanine
Lowest 0.233 0.080 0.038 -0.042 5.09 4.66 6.09 -4.18
2 0.181 0.062 0.026 -0.034 5.16 5.12 4.56 -4.70
3 0.183 0.065 0.025 -0.037 5.55 5.60 5.26 -5.73
4 0.145 0.051 0.018 -0.020 6.10 5.56 4.21 -4.40
5 0.122 0.046 0.014 -0.015 5.70 5.42 3.86 -3.73
6 0.099 0.034 0.010 -0.012 4.99 4.66 2.98 -2.98
7 0.070 0.021 0.012 -0.004 3.10 2.55 3.18 -1.06
8 0.058 0.016 0.005 -0.001 2.39 1.70 1.13 -0.26

Education
Basic 0.003 0.001 0.000 -0.001 2.49 2.27 2.44 -1.63
Vocational -0.002 0.000 0.000 0.001 -1.46 -0.96 -1.72 3.10
Matricular 0.003 0.001 0.000 -0.001 2.55 1.89 0.42 -3.86

Ordinary income decile

No Income -0.326 -0.119 0.011 0.063 -6.58 -6.73 1.71 6.50
Lowest -0.257 -0.098 0.024 0.054 -7.25 -8.00 5.95 7.85
2 -0.216 -0.088 0.024 0.052 -7.41 -8.50 5.74 7.73
3 -0.149 -0.064 0.024 0.043 -5.03 -5.97 5.40 6.83
4 -0.152 -0.069 0.020 0.035 -5.11 -6.36 4.69 5.95
5 -0.080 -0.041 0.025 0.021 -3.25 -4.56 6.24 4.05
6 -0.097 -0.048 0.020 0.025 -4.20 -5.67 4.64 5.11
7 -0.094 -0.043 0.020 0.022 -4.47 -5.65 6.18 4.90
8 -0.068 -0.030 0.012 0.013 -3.38 -4.08 3.73 3.09
9 -0.041 -0.015 0.007 0.006 -2.04 -1.99 2.04 1.68
Income Log-Growth Rate -0.055 -0.017 -0.003 0.008 -4.23 -4.03 -1.69 3.00

Wealth dummies by wealth type

Housing -0.005 -0.001 0.001 -0.001 -0.40 -0.26 0.28 -0.40
Forest -0.134 -0.037 -0.009 0.038 -2.43 -1.96 -1.14 3.52
Private equity -0.082 -0.020 -0.017 0.016 -2.71 -2.19 -3.38 2.85
Foreign assets excluding equity -0.148 -0.043 -0.019 0.030 -0.72 -0.71 -0.62 0.81

Net Worth decile

No Net Worth 0.106 0.068 0.000 0.016 4.11 8.18 -0.07 3.46
Lowest 0.067 0.047 -0.010 0.035 1.56 3.26 -1.76 4.14
2 0.167 0.079 0.012 -0.017 5.06 6.96 2.68 -2.54
3 0.107 0.048 0.012 0.006 3.27 4.41 2.64 0.95
4 0.104 0.054 0.010 0.004 3.64 5.64 2.19 0.54
5 0.055 0.042 0.007 0.008 1.53 3.54 1.51 1.25
6 0.085 0.053 0.008 0.002 2.48 4.59 1.79 0.33
7 0.085 0.049 0.011 0.009 2.48 4.37 2.64 1.32
8 0.091 0.044 0.014 0.002 2.87 4.12 3.11 0.42
9 0.061 0.029 0.004 0.005 1.94 2.85 1.07 0.86
Other demographics
Swedish speaker -0.097 -0.045 0.006 0.017 -3.88 -5.60 1.73 2.95
Married -0.023 -0.013 0.004 0.005 -0.99 -1.53 1.11 0.95
Cohabitor 0.012 0.004 -0.006 -0.002 0.34 0.27 -1.18 -0.25
Kids -0.034 -0.009 0.002 0.008 -1.42 -1.03 0.53 1.61

Occupation
Entrepreneur -0.040 -0.007 0.002 0.006 -1.27 -0.64 0.43 0.99
Farmer -0.212 -0.051 -0.057 0.049 -2.36 -1.69 -4.30 2.95
Finance professional -0.017 0.004 -0.021 -0.004 -0.30 0.21 -3.38 -0.34
Unemployed 0.038 0.021 -0.002 -0.002 1.08 1.79 -0.38 -0.25

Cohort Fixed Effects Yes Yes Yes Yes

2
Wald-χ (IQ1 = … = IQ8 = 0) 9.1 8.8 7.7 9.3
Adjusted R-squared 0.017 0.019 0.025 0.036
N 36,359 36,359 36,359 36,359  
 1 (44)

Internet Appendix to “IQ and Stock Market Participation”*

This appendix contains additional results referred to in “IQ and Stock Market Participation.”

Figure IA.1 Alternative version of Figure 1 using the narrow definition of stock market
participation (i.e., only direct stockholding count towards stock market
participation).
Tables IA.1-IA.7 Alternative versions of Tables 1 through 7 using the narrow definition of
stock market participation. Panel A of Table IA.1 is omitted and Table
IA.7 shows the probit and negative binomial regressions of Table 7 Panel
C.
Table IA.8 Alternative version Table 2 using a different definition of stock market
participation. An individual is defined as a stock market participant if he
purchased stock between 1995 and 2002.
Table IA.9 Alternative versions of Table 2 that omit various blocks of regressors.
Panel A omits education variables; Panel B omits wealth variables; Panel
C omits income variables; and Panel D omits IQ variables.
Table IA.10 Alternative version of Table 2 estimated using all individuals in the data,
including those without IQ data. This regression omits IQ variables.
Table IA.11 Alternative versions of Table 2 with different versions of the intelligence
score. Panel A replaces the composite intelligence score with its ‘logical
ability’ subcomponent; Panel B uses the ‘verbal ability’ subcomponent;
Panel C uses the ‘numerical ability’ subcomponent; and Panel D includes
all three subcomponents simultaneously as separate (linear) variables.
Table IA.12 Alternative versions of Table 2 estimated from age-grouped individuals.
Panel A uses individuals born between 1953 and 1969. Panel B uses
individuals born between 1970 and 1982.
Table IA.13 Alternative versions of Table 2 when years prior to 2000 define stock
market participation. An individual’s stock market participation status is
based on the end-of-1998 (Panel A) or end-of-1999 (Panel B) holdings.
(The tables in the paper use end-of-2000 holdings.) Panel C uses the end-
of-2000 holdings but does not count Nokia towards stock market
participation.
Table IA.14 Alternative version of Table 2 that replaces IQ dummy variables with their
average values from each subject’s zip code and cohort.
Table IA.15 Alternative versions of Table 2 using different definitions of stock market
participation. An individual is defined as a stock market participant in
Panel A only if he holds mutual funds (i.e., direct stock ownership does
not count). An individual is a stock market participant in Panel B if he
owns mutual funds or at least two different individual stocks.
Table IA.16 Alternative version of Table 2 that excludes individuals who received
employer stock or options as compensation.
                                                        
*
Citation format: Grinblatt, Mark, Matti Keloharju, and Juhani T. Linnainmaa, 2011, Internet Appendix to “IQ and
Stock Market Participation,” Journal of Finance [vol #], [pages], http://www.afajof.org/IA/[year].asp. Please note:
Wiley-Blackwell is not responsible for the content or functionality of any supporting information supplied by the
authors. Any queries (other than missing material) should be directed to the authors of the article.
 2 (44)

Table IA.17 Alternative versions of Table 2 using different samples. Panel A uses a
sample of sisters of the study’s male subjects. Panel B uses a sample of
brothers of the study’s male subjects. In both panels, brothers’ IQ scores
replace own IQ scores.
Table IA.18 Alternative version of Table 7 using the linear-IQ specification.
Table IA.19 Alternative version of Table 7 that restricts the sample to the 10% most
affluent individuals based on income.
Table IA.20 Alternative versions of Table 7 Panels C and D. The systematic- and
idiosyncratic-variance regressions are estimated using HEX-index-based
one- and three-factor models.
 3 (44)

Figure IA.1: Alternative version of Figure 1 using the narrow definition of stock market participation

0.25
Market Participants
Non-Participants

0.2
Fraction of Individuals

0.15

0.1

0.05

0
Low 2 3 4 5 6 7 8 High
IQ Score  
 4 (44)

Table IA.1: An alternative version of Table 1 using the narrow definition of stock market participation.

Panel B: Mean socioeconomic characteristics by stock market participation

Stock Market Participant
All No Yes
IQ 5.25 5.02 5.97
Education
Basic 21.6% 22.4% 19.3%
Vocational 42.6% 43.2% 40.9%
Matricular 18.8% 18.8% 19.0%
University 16.9% 15.7% 20.8%
Ordinary Income, EUR 22,642 20,214 30,341
Ordinary Income, Log-Growth 11.8% 11.8% 12.0%
Wealth
Taxable home wealth > 0 37.7% 32.0% 55.5%
Taxable forest wealth > 0 1.3% 1.0% 2.2%
Taxable foreign wealth > 0 0.0% 0.0% 0.1%
Taxable private equity > 0 2.6% 2.1% 4.1%
Taxable net worth, EUR 11,193 3,036 37,051
Other Demographics
Swedish 7.0% 6.7% 8.1%
Married 29.6% 27.6% 35.7%
Cohabiter 6.5% 6.8% 5.4%
Kids 29.8% 28.8% 33.0%
Occupation
Entrepreneur 2.8% 2.7% 3.0%
Farmer 0.9% 0.7% 1.4%
Finance professional 0.7% 0.4% 1.8%
Unemployed 8.6% 10.3% 3.1%
Number of observations 158,044 120,143 37,901  
 5 (44)

Panel C: Mean socioeconomic characteristics by IQ score

IQ score
1 2 3 4 5 6 7 8 9 All
Stock Market Participant 8.0% 10.5% 14.1% 16.8% 22.1% 28.0% 32.6% 36.6% 40.7% 24.0%
Education
Basic 23.8% 23.6% 23.2% 22.9% 22.0% 21.2% 20.2% 19.5% 18.6% 21.6%
Vocational 47.5% 46.5% 45.9% 44.4% 43.1% 41.7% 40.3% 39.0% 37.2% 42.6%
Matricular 14.1% 15.1% 16.0% 17.3% 18.4% 19.6% 20.9% 22.1% 24.0% 18.8%
University 14.6% 14.8% 14.9% 15.3% 16.5% 17.5% 18.6% 19.5% 20.2% 16.9%
Ordinary Income, EUR 16,062 17,666 18,427 19,640 21,413 23,874 26,171 28,191 31,707 22,642
Ordinary Income, Log-Growth 7.1% 7.4% 8.3% 11.0% 11.5% 13.3% 13.4% 14.3% 16.1% 11.8%
Wealth
Taxable home wealth > 0 27.9% 31.4% 34.0% 34.8% 37.6% 40.1% 40.8% 42.1% 42.8% 37.7%
Taxable forest wealth > 0 1.2% 1.4% 1.2% 1.3% 1.3% 1.2% 1.2% 1.3% 1.4% 1.3%
Taxable foreign wealth > 0 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0%
Taxable private equity > 0 1.8% 2.1% 2.3% 2.4% 2.4% 2.8% 3.0% 3.0% 3.3% 2.6%
Taxable net worth, EUR 3,627 4,655 7,393 6,730 9,231 9,575 12,019 16,340 43,619 11,193
Other Demographics
Swedish 6.6% 7.4% 10.0% 5.9% 6.7% 6.9% 6.5% 6.9% 8.4% 7.0%
Married 22.5% 25.7% 25.8% 27.0% 29.3% 31.7% 32.0% 34.0% 33.2% 29.6%
Cohabiter 10.1% 10.0% 9.4% 8.0% 6.8% 5.3% 4.3% 3.7% 2.8% 6.5%
Kids 29.7% 32.0% 31.7% 30.5% 30.2% 29.8% 28.3% 28.5% 26.6% 29.8%
Occupation
Entrepreneur 3.2% 3.6% 3.2% 2.9% 2.7% 2.6% 2.4% 2.5% 2.6% 2.8%
Farmer 1.1% 1.1% 1.2% 0.9% 1.0% 0.8% 0.7% 0.7% 0.7% 0.9%
Finance professional 0.0% 0.1% 0.0% 0.2% 0.6% 0.9% 1.2% 1.7% 1.6% 0.7%
Unemployed 22.4% 16.7% 13.8% 11.3% 8.3% 6.0% 4.2% 3.4% 2.2% 8.6%
Number of observations 5,552 10,749 12,002 25,040 33,124 31,943 17,958 12,145 9,531 158,044  
 6 (44)

Table IA.2: An alternative version of Table 2 using the narrow definition of stock market participation.

IQ Dummy Specification Linear IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.086 37.48 0.024
Lowest -0.683 -23.00 -0.176
2 -0.572 -23.86 -0.155
3 -0.439 -19.28 -0.126
4 -0.360 -19.92 -0.107
5 -0.251 -14.64 -0.077
6 -0.139 -8.17 -0.045
7 -0.072 -4.06 -0.024
8 -0.028 -1.44 -0.009

Education
Basic -0.006 -5.02 -0.002 -0.006 -5.08 -0.002
Vocational -0.016 -13.42 -0.005 -0.016 -13.28 -0.005
Matricular 0.000 -0.06 0.000 0.000 -0.18 0.000

Ordinary income decile

No Income -0.285 -8.61 -0.087 -0.286 -8.62 -0.071
Lowest -0.365 -17.38 -0.111 -0.366 -17.36 -0.090
2 -0.450 -20.58 -0.133 -0.450 -20.58 -0.108
3 -0.458 -21.72 -0.135 -0.459 -21.72 -0.109
4 -0.522 -29.54 -0.151 -0.524 -29.44 -0.122
5 -0.541 -28.99 -0.155 -0.543 -29.11 -0.125
6 -0.476 -24.68 -0.139 -0.476 -24.73 -0.113
7 -0.389 -23.76 -0.117 -0.387 -23.63 -0.095
8 -0.285 -16.38 -0.089 -0.283 -16.30 -0.072
9 -0.147 -9.04 -0.047 -0.144 -8.88 -0.039
Income Log-Growth Rate 0.023 2.94 0.008 0.023 2.93 0.007

Wealth dummies by wealth type

Housing 0.193 17.27 0.065 0.193 17.36 0.056
Forest -0.068 -1.46 -0.022 -0.068 -1.47 -0.019
Private equity -0.070 -3.05 -0.023 -0.070 -3.06 -0.019
Foreign assets excluding equity 0.378 1.72 0.138 0.379 1.73 0.123

Net Worth decile

No Net Worth -1.548 -52.65 -0.552 -1.546 -52.34 -0.518
Lowest -0.865 -24.09 -0.209 -0.861 -23.85 -0.162
2 -0.683 -19.66 -0.179 -0.681 -19.49 -0.140
3 -0.735 -23.02 -0.188 -0.734 -22.90 -0.147
4 -0.768 -22.48 -0.194 -0.766 -22.38 -0.151
5 -0.785 -24.28 -0.197 -0.784 -24.14 -0.153
6 -0.717 -22.60 -0.185 -0.716 -22.42 -0.145
7 -0.676 -20.25 -0.178 -0.675 -20.14 -0.139
8 -0.568 -17.69 -0.156 -0.568 -17.63 -0.124
9 -0.394 -12.53 -0.116 -0.392 -12.43 -0.093

Other demographics
Swedish speaker 0.028 1.30 0.010 0.027 1.24 0.008
Married 0.010 0.65 0.003 0.010 0.64 0.003
Cohabitor 0.017 0.73 0.006 0.015 0.65 0.004
Kids -0.099 -6.36 -0.033 -0.098 -6.29 -0.027

Occupation
Entrepreneur -0.053 -2.20 -0.018 -0.056 -2.29 -0.015
Farmer -0.110 -1.89 -0.036 -0.111 -1.90 -0.030
Finance professional 0.386 9.25 0.141 0.386 9.23 0.125
Unemployed -0.344 -19.23 -0.105 -0.347 -19.38 -0.086
Cohort Fixed Effects Yes Yes
Baseline probability 0.278 0.203
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,522.9
Pseudo R-squared 0.1848 0.1843
N 158,044 158,044
 7 (44)

Table IA.3: An alternative version of Table 3 using the narrow definition of stock market participation.

Panel A: Ordinary Income in Top 10% of the Distribution

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.051 7.31 0.020
Lowest -0.364 -2.32 -0.143
2 -0.646 -6.25 -0.245
3 -0.338 -4.13 -0.133
4 -0.238 -4.76 -0.094
5 -0.132 -3.30 -0.053
6 -0.031 -0.77 -0.012
7 -0.046 -1.15 -0.018
8 -0.010 -0.26 -0.004

Education
Basic -0.004 -1.40 -0.001 -0.004 -1.39 -0.001
Vocational -0.014 -5.53 -0.005 -0.014 -5.50 -0.005
Matricular 0.001 0.23 0.000 0.001 0.28 0.001

Income Log-Growth Rate 0.036 0.90 0.014 0.030 0.74 0.012

Wealth dummies by wealth type

Housing 0.220 9.04 0.088 0.220 9.03 0.088
Forest 0.006 0.06 0.002 0.006 0.06 0.002
Private equity -0.012 -0.24 -0.005 -0.016 -0.32 -0.006
Foreign assets excluding equity 0.507 1.53 0.191 0.515 1.49 0.197

Net Worth decile

No Net Worth -1.225 -26.53 -0.456 -1.218 -26.49 -0.457
Lowest -0.880 -10.67 -0.319 -0.873 -10.56 -0.308
2 -0.687 -8.44 -0.260 -0.690 -8.43 -0.255
3 -0.733 -9.92 -0.275 -0.729 -9.87 -0.268
4 -0.806 -10.39 -0.299 -0.796 -10.28 -0.288
5 -0.761 -10.89 -0.285 -0.755 -10.85 -0.276
6 -0.662 -9.31 -0.252 -0.656 -9.23 -0.245
7 -0.609 -8.06 -0.234 -0.602 -7.95 -0.227
8 -0.503 -8.17 -0.196 -0.498 -8.08 -0.191
9 -0.352 -6.25 -0.139 -0.347 -6.15 -0.136

Other demographics
Swedish speaker 0.060 1.34 0.024 0.054 1.18 0.021
Married -0.033 -0.86 -0.013 -0.031 -0.81 -0.012
Cohabitor 0.047 0.75 0.019 0.041 0.66 0.017
Kids -0.106 -3.01 -0.042 -0.105 -2.98 -0.042

Occupation
Entrepreneur -0.058 -1.13 -0.023 -0.077 -1.54 -0.031
Farmer -0.086 -0.61 -0.034 -0.093 -0.65 -0.037
Finance professional 0.288 5.37 0.112 0.291 5.46 0.115
Unemployed -0.240 -0.95 -0.095 -0.243 -0.97 -0.096
Cohort Fixed Effects Yes Yes

Baseline probability 0.524 0.494

2
Wald-χ (IQ1 = … = IQ8 = 0) 82.3
Pseudo R-squared 0.0991 0.0977
N 15,413 15,413  
 8 (44)

Panel B: Net Worth in Top 10% of the Distribution 
IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.090 6.78 0.025
Lowest -0.741 -3.94 -0.232
2 -0.606 -4.31 -0.182
3 -0.445 -3.81 -0.126
4 -0.488 -4.70 -0.140
5 -0.238 -2.54 -0.062
6 -0.143 -1.56 -0.036
7 -0.158 -1.71 -0.039
8 -0.007 -0.06 -0.002

Education
Basic -0.002 -0.35 0.000 -0.002 -0.41 -0.001
Vocational -0.023 -5.29 -0.005 -0.023 -5.27 -0.006
Matricular 0.002 0.29 0.001 0.002 0.30 0.001

Ordinary income decile

No Income 0.004 0.03 0.001 0.004 0.03 0.001
Lowest 0.156 1.24 0.033 0.150 1.19 0.040
2 -0.186 -1.52 -0.047 -0.185 -1.51 -0.055
3 -0.124 -1.16 -0.030 -0.122 -1.14 -0.036
4 -0.176 -1.65 -0.044 -0.172 -1.61 -0.051
5 -0.198 -1.94 -0.050 -0.205 -2.02 -0.062
6 -0.212 -2.01 -0.054 -0.211 -2.00 -0.063
7 -0.146 -1.39 -0.036 -0.150 -1.44 -0.044
8 -0.049 -0.53 -0.012 -0.045 -0.49 -0.013
9 -0.004 -0.06 -0.001 -0.002 -0.02 -0.001
Income Log-Growth Rate -0.042 -1.05 -0.010 -0.040 -1.01 -0.011

Wealth dummies by wealth type

Housing -0.037 -0.40 -0.008 -0.039 -0.42 -0.011
Forest 0.102 0.90 0.023 0.098 0.87 0.027
Private equity -0.056 -0.69 -0.013 -0.055 -0.68 -0.016
Foreign assets excluding equity -0.377 -1.01 -0.104 -0.352 -0.93 -0.112

Other demographics
Swedish speaker 0.104 1.58 0.023 0.109 1.65 0.029
Married 0.044 0.52 0.010 0.048 0.56 0.013
Cohabitor 0.123 0.94 0.027 0.129 0.98 0.034
Kids -0.238 -2.77 -0.056 -0.243 -2.81 -0.068

Occupation
Entrepreneur -0.013 -0.11 -0.003 -0.010 -0.09 -0.003
Farmer -0.352 -2.79 -0.093 -0.351 -2.78 -0.109
Finance professional 0.442 2.40 0.081 0.450 2.44 0.103
Unemployed 0.037 0.21 0.008 0.036 0.21 0.010

Cohort Fixed Effects Yes Yes

Baseline probability 0.852 0.801

2
Wald-χ (IQ1 = … = IQ8 = 0) 51.0
Pseudo R-squared 0.1123 0.1107
N 3,857 3,857  
 9 (44)

Table IA.4: An alternative version of Table 4 using the narrow definition of stock market participation.

Panel A: Decomposition Estimates for IQ 1 versus IQ 9 Individuals

Decomposition
Estimate, % z -value
Education 17.9% 45.8
Income 15.0% 45.4
Asset Class Ownership 2.3% 18.9
Wealth 20.9% 107.5
Demographics 0.6% 4.5
Profession and Unemployment 5.1% 27.2
Cohort 1.1% 4.2
Unexplained 37.0%

IQ=1 Participation Rate 8.0%

IQ=9 Participation Rate 40.7%
Difference in Participation Rates 32.7%  

Panel B: Decomposition Estimates for IQ 2 versus IQ 8 Individuals

Decomposition
Estimate, % z -value
Education 16.9% 44.2
Income 16.5% 45.1
Asset Class Ownership 2.1% 18.8
Wealth 18.4% 108.4
Demographics 0.6% 4.9
Profession and Unemployment 4.5% 27.2
Cohort 1.2% 4.6
Unexplained 39.8%

IQ=2 Participation Rate 10.5%

IQ=8 Participation Rate 36.6%
Difference in Participation Rates 26.1%  
 
 10 (44)

Table IA.5: An alternative version of Table 5 using the narrow definition of stock market participation.

Marginal
Independent variables Coefficients z -values Effects
IQ stanine 0.256 5.51 0.048
Education
Basic 0.003 0.39 0.001
Vocational -0.021 -2.69 -0.004
Matricular 0.003 0.33 0.000
Ordinary income decile
No Income 0.191 1.01 0.036
Lowest 0.613 2.75 0.115
2 -0.110 -0.54 -0.021
3 -0.019 -0.11 -0.004
4 -0.027 -0.17 -0.005
5 -0.240 -1.67 -0.045
6 0.030 0.22 0.006
7 -0.150 -1.33 -0.028
8 -0.162 -1.49 -0.030
9 -0.128 -1.24 -0.024
Income Log-Growth Rate 0.013 0.30 0.002
Wealth dummies by wealth type
Housing -0.093 -0.84 -0.017
Forest -1.066 -1.82 -0.200
Private equity -0.170 -0.71 -0.032
Foreign assets excluding equity
Net Worth decile
No Net Worth -1.873 -10.37 -0.352
Lowest -1.135 -3.63 -0.213
2 -0.860 -2.74 -0.162
3 -0.945 -3.52 -0.178
4 -0.990 -3.66 -0.186
5 -0.987 -3.87 -0.185
6 -0.891 -3.65 -0.167
7 -0.688 -3.17 -0.129
8 -0.475 -2.19 -0.089
9 -0.422 -2.08 -0.079
Other demographics
Swedish speaker 0.182 1.78 0.034
Married -0.093 -0.34 -0.017
Cohabitor 0.079 0.13 0.015
Kids -0.264 -0.52 -0.050
Occupation
Entrepreneur -0.124 -0.42 -0.023
Farmer 0.336 0.57 0.063
Finance professional 0.177 0.23 0.033
Unemployed -0.436 -2.35 -0.082
st
1 Stage Control Variable -0.195 -3.88 0.229
Cohort Fixed Effects Yes

Baseline probability 0.110

Pseudo R-squared 0.2689
N 3,992  
 11 (44)

Table IA.6: An alternative version of Table 6 using the narrow definition of stock market participation.

IQ Dummy Specification Linear IQ Specification

Independent variables Coefficients z -values Coefficients z -values

IQ stanine 0.114 3.87
Lowest -0.860 -2.09
2 -0.803 -2.34
3 -0.255 -0.91
4 -0.481 -2.06
5 -0.302 -1.40
6 0.097 0.47
7 -0.111 -0.51
8 0.148 0.61

Education
Basic -0.007 -0.52 -0.007 -0.50
Vocational -0.049 -3.73 -0.049 -3.77
Matricular 0.000 -0.01 -0.001 -0.06

Ordinary income decile

No Income 0.765 2.23 0.752 2.22
Lowest 1.257 3.31 1.208 3.20
2 0.006 0.02 -0.025 -0.07
3 0.333 1.17 0.317 1.13
4 0.244 0.96 0.244 0.96
5 0.109 0.48 0.109 0.48
6 0.330 1.51 0.321 1.48
7 0.019 0.10 0.006 0.03
8 -0.085 -0.48 -0.088 -0.49
9 -0.028 -0.17 -0.038 -0.23
Income Log-Growth Rate 0.101 1.32 0.099 1.30

Wealth dummies by wealth type

Housing -1.309 -1.28 -1.380 -1.37
Forest -0.298 -0.65 -0.323 -0.71
Private equity -3.181 -9.89 -3.152 -9.88
Foreign assets excluding equity

Net Worth decile

No Net Worth -2.010 -4.07 -2.036 -4.13
Lowest -1.324 -2.84 -1.283 -2.76
2 -1.682 -3.46 -1.671 -3.44
3 -1.214 -2.68 -1.217 -2.71
4 -1.646 -3.92 -1.618 -3.87
5 -1.359 -3.33 -1.365 -3.37
6 -1.158 -3.07 -1.161 -3.09
7 -0.769 -1.96 -0.764 -1.96
8 -0.508 -1.37 -0.524 -1.42
9 0.229 1.16 0.240 1.23

Other demographics
Swedish speaker
Married 0.406 0.96 0.322 0.77
Cohabitor 1.230 1.30 1.024 1.10
Kids -1.033 -1.28 -0.903 -1.14

Occupation
Entrepreneur -0.570 -1.15 -0.511 -1.05
Farmer 0.203 0.23 0.311 0.36
Finance professional 0.431 0.41 0.442 0.43
Unemployed -0.810 -2.82 -0.806 -2.83

Cohort Fixed Effects Yes Yes

2
Wald-χ (IQ1 = … = IQ8 = 0) 24.4
N 3,766 3,766
 12 (44)

Table IA.7: An alternative version of Table 7 Panel C using the narrow definition of stock market participation.

Panel A: Probit Regression of the Decision to Own Mutual Funds

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.047 11.82 0.013
Lowest -0.363 -4.35 -0.095
2 -0.388 -6.80 -0.100
3 -0.323 -6.36 -0.086
4 -0.198 -6.24 -0.056
5 -0.187 -7.11 -0.053
6 -0.110 -4.26 -0.032
7 -0.081 -2.81 -0.024
8 -0.051 -1.77 -0.015

Education
Basic 0.001 0.58 0.000 0.001 0.56 0.000
Vocational -0.002 -1.60 -0.001 -0.002 -1.63 -0.001
Matricular 0.000 0.23 0.000 0.000 0.17 0.000

Ordinary income decile

No Income -0.229 -3.51 -0.064 -0.228 -3.50 -0.056
Lowest -0.371 -9.04 -0.099 -0.371 -9.04 -0.087
2 -0.345 -8.09 -0.093 -0.345 -8.10 -0.082
3 -0.300 -7.09 -0.082 -0.300 -7.11 -0.073
4 -0.371 -8.82 -0.099 -0.373 -8.87 -0.087
5 -0.301 -7.95 -0.082 -0.302 -8.00 -0.073
6 -0.261 -7.58 -0.073 -0.263 -7.55 -0.065
7 -0.213 -6.33 -0.060 -0.214 -6.37 -0.054
8 -0.151 -4.95 -0.044 -0.151 -4.96 -0.039
9 -0.123 -4.69 -0.036 -0.122 -4.65 -0.032
Income Log-Growth Rate 0.016 0.98 0.005 0.016 1.00 0.004

Wealth dummies by wealth type

Housing -0.081 -4.13 -0.025 -0.081 -4.15 -0.022
Forest -0.090 -1.05 -0.027 -0.091 -1.05 -0.024
Private equity -0.020 -0.56 -0.006 -0.020 -0.57 -0.006
Foreign assets excluding equity -0.062 -0.21 -0.018 -0.057 -0.19 -0.015

Net Worth decile

No Net Worth -0.970 -31.96 -0.285 -0.968 -31.93 -0.257
Lowest -0.046 -1.01 -0.014 -0.046 -0.99 -0.012
2 -0.365 -9.03 -0.097 -0.364 -9.01 -0.085
3 -0.216 -5.53 -0.061 -0.215 -5.49 -0.054
4 -0.295 -6.94 -0.080 -0.294 -6.92 -0.071
5 -0.358 -8.35 -0.095 -0.357 -8.31 -0.084
6 -0.364 -8.69 -0.097 -0.364 -8.69 -0.085
7 -0.449 -11.30 -0.115 -0.448 -11.32 -0.101
8 -0.313 -7.49 -0.085 -0.313 -7.47 -0.075
9 -0.222 -6.29 -0.063 -0.221 -6.26 -0.055

Other demographics
Swedish speaker 0.219 7.39 0.071 0.217 7.30 0.064
Married 0.020 0.75 0.006 0.020 0.74 0.005
Cohabitor 0.056 1.19 0.017 0.054 1.14 0.015
Kids -0.189 -6.23 -0.056 -0.188 -6.20 -0.050

Occupation
Entrepreneur -1.513 -14.88 -0.231 -1.513 -14.89 -0.195
Farmer -0.549 -5.12 -0.132 -0.550 -5.11 -0.115
Finance professional 0.330 6.53 0.111 0.330 6.51 0.102
Unemployed -0.115 -2.22 -0.034 -0.116 -2.24 -0.030

Cohort Fixed Effects Yes Yes

Baseline probability 0.230 0.192

2
Wald-χ (IQ1 = … = IQ8 = 0) 144.4
Pseudo R-squared 0.0926 0.0924
N 37,901 37,901
 13 (44)

Panel B: Negative Binomial Regression of the Number of Stocks Held

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.038 13.47 0.094
Lowest -0.274 -5.44 -0.657
2 -0.284 -7.99 -0.678
3 -0.280 -9.88 -0.669
4 -0.159 -8.38 -0.403
5 -0.118 -6.66 -0.306
6 -0.052 -2.99 -0.138
7 -0.059 -2.73 -0.155
8 -0.016 -0.86 -0.042

Education
Basic -0.003 -2.69 -0.011 -0.004 -3.30 -0.010
Vocational -0.007 -6.54 -0.018 -0.007 -6.22 -0.017
Matricular -0.002 -1.07 -0.005 -0.002 -1.14 -0.005

Ordinary income decile

No Income -0.022 -0.50 -0.057 -0.020 -0.46 -0.049
Lowest -0.130 -5.60 -0.338 -0.130 -5.58 -0.308
2 -0.180 -8.14 -0.459 -0.181 -8.17 -0.420
3 -0.203 -8.86 -0.511 -0.204 -8.91 -0.470
4 -0.244 -11.75 -0.604 -0.248 -11.93 -0.559
5 -0.247 -10.67 -0.610 -0.250 -10.77 -0.565
6 -0.256 -11.06 -0.631 -0.259 -11.17 -0.584
7 -0.194 -8.61 -0.491 -0.195 -8.70 -0.452
8 -0.132 -6.95 -0.345 -0.132 -6.93 -0.316
9 -0.107 -6.62 -0.283 -0.106 -6.53 -0.257
Income Log-Growth Rate 0.013 1.18 0.035 0.014 1.26 0.034

Wealth dummies by wealth type

Housing -0.036 -2.94 -0.102 -0.038 -3.04 -0.095
Forest -0.024 -0.51 -0.064 -0.024 -0.50 -0.059
Private equity 0.060 1.95 0.170 0.060 1.95 0.155
Foreign assets excluding equity 0.089 0.60 0.265 0.101 0.67 0.266

Net Worth decile

No Net Worth -1.025 -47.22 -2.861 -1.024 -46.78 -2.618
Lowest -1.071 -32.77 -1.875 -1.070 -32.56 -1.717
2 -1.013 -36.57 -1.828 -1.012 -36.33 -1.674
3 -0.834 -34.30 -1.609 -0.833 -33.94 -1.473
4 -0.722 -24.28 -1.455 -0.722 -24.08 -1.333
5 -0.703 -25.04 -1.427 -0.702 -24.73 -1.307
6 -0.627 -24.97 -1.315 -0.628 -24.82 -1.205
7 -0.635 -21.92 -1.329 -0.634 -21.71 -1.217
8 -0.511 -18.78 -1.126 -0.510 -18.77 -1.032
9 -0.394 -15.63 -0.915 -0.394 -15.50 -0.838

Other demographics
Swedish speaker 0.058 2.88 0.160 0.055 2.70 0.140
Married -0.047 -2.56 -0.128 -0.047 -2.57 -0.117
Cohabitor 0.017 0.61 0.045 0.014 0.51 0.035
Kids -0.083 -4.30 -0.228 -0.084 -4.36 -0.208

Occupation
Entrepreneur -0.045 -1.64 -0.120 -0.046 -1.70 -0.114
Farmer -0.063 -0.96 -0.169 -0.065 -1.00 -0.159
Finance professional 0.213 6.55 0.650 0.216 6.63 0.602
Unemployed 0.020 0.65 0.057 0.019 0.62 0.049

Cohort Fixed Effects Yes Yes

Baseline Number of Stocks 2.737 2.508

2
Wald-χ (IQ1 = … = IQ8 = 0) 217.8
N 37,901 37,901  
 14 (44)

Table IA.8: Alternative version Table 2 using a different definition of stock market participation. An individual
is defined as a stock market participant if he purchased stock between 1995 and 2002.

IQ Dummy Specification Linear IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.096 38.15 0.024
Lowest -0.757 -22.33 -0.172
2 -0.617 -25.45 -0.150
3 -0.539 -23.87 -0.136
4 -0.410 -22.91 -0.110
5 -0.278 -17.48 -0.079
6 -0.148 -9.39 -0.044
7 -0.080 -4.21 -0.024
8 -0.036 -2.05 -0.011

Education
Basic -0.009 -8.90 -0.003 -0.009 -8.98 -0.002
Vocational -0.016 -17.06 -0.005 -0.016 -16.74 -0.004
Matricular -0.001 -0.46 0.000 -0.001 -0.62 0.000

Ordinary income decile

No Income -0.484 -12.49 -0.127 -0.484 -12.49 -0.096
Lowest -0.573 -26.19 -0.150 -0.574 -26.25 -0.114
2 -0.656 -30.82 -0.167 -0.656 -30.76 -0.125
3 -0.654 -28.72 -0.166 -0.656 -28.86 -0.125
4 -0.744 -34.28 -0.183 -0.747 -34.37 -0.137
5 -0.780 -40.27 -0.189 -0.783 -40.61 -0.142
6 -0.689 -34.28 -0.173 -0.691 -34.42 -0.130
7 -0.597 -33.10 -0.155 -0.597 -33.07 -0.117
8 -0.441 -27.38 -0.121 -0.439 -27.28 -0.092
9 -0.235 -14.90 -0.069 -0.232 -14.77 -0.053
Income Log-Growth Rate 0.019 2.05 0.006 0.020 2.08 0.005

Wealth dummies by wealth type

Housing 0.197 16.97 0.063 0.198 17.09 0.051
Forest -0.004 -0.07 -0.001 -0.004 -0.07 -0.001
Private equity 0.008 0.34 0.003 0.007 0.33 0.002
Foreign assets excluding equity 0.392 1.79 0.138 0.394 1.78 0.118

Net Worth decile

No Net Worth -1.355 -46.24 -0.477 -1.352 -45.97 -0.426
Lowest -0.775 -22.30 -0.178 -0.771 -22.05 -0.131
2 -0.823 -22.26 -0.185 -0.821 -22.13 -0.135
3 -0.712 -21.42 -0.169 -0.711 -21.34 -0.125
4 -0.728 -21.09 -0.171 -0.727 -21.11 -0.126
5 -0.750 -20.94 -0.174 -0.747 -20.83 -0.128
6 -0.706 -21.14 -0.168 -0.704 -21.08 -0.124
7 -0.682 -19.47 -0.164 -0.681 -19.41 -0.121
8 -0.602 -17.80 -0.150 -0.602 -17.76 -0.112
9 -0.428 -13.46 -0.115 -0.426 -13.39 -0.087

Other demographics
Swedish speaker -0.008 -0.41 -0.002 -0.011 -0.55 -0.003
Married -0.021 -1.36 -0.007 -0.021 -1.33 -0.005
Cohabitor 0.012 0.55 0.004 0.010 0.43 0.002
Kids -0.091 -5.75 -0.028 -0.091 -5.68 -0.023

Occupation
Entrepreneur -0.001 -0.05 0.000 -0.004 -0.17 -0.001
Farmer -0.075 -1.31 -0.023 -0.076 -1.34 -0.019
Finance professional 0.673 15.46 0.248 0.675 15.39 0.219
Unemployed -0.243 -13.87 -0.071 -0.247 -14.08 -0.056
Cohort Fixed Effects Yes Yes
Baseline probability 0.247 0.170
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,648.3
Pseudo R-squared 0.187 0.186
N 158,044 158,044
 15 (44)

Table IA.9: Alternative versions of Table 2 that omit various blocks of regressors. Panel A omits education
variables; Panel B omits wealth variables; Panel C omits income variables; and Panel D omits IQ variables.

Panel A: Education variables omitted

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.107 44.34 0.034
Lowest -0.835 -28.00 -0.245
2 -0.697 -30.82 -0.215
3 -0.590 -24.79 -0.189
4 -0.468 -24.76 -0.156
5 -0.342 -19.61 -0.119
6 -0.211 -12.03 -0.076
7 -0.119 -6.78 -0.044
8 -0.046 -2.59 -0.017

Education
Basic
Vocational
Matricular

Ordinary income decile

No Income -0.361 -11.05 -0.125 -0.362 -11.06 -0.100
Lowest -0.512 -24.95 -0.173 -0.512 -24.97 -0.138
2 -0.584 -29.16 -0.194 -0.584 -29.19 -0.153
3 -0.591 -31.36 -0.196 -0.593 -31.55 -0.155
4 -0.662 -39.24 -0.216 -0.664 -39.30 -0.169
5 -0.675 -36.65 -0.219 -0.676 -36.78 -0.171
6 -0.595 -32.38 -0.197 -0.596 -32.44 -0.156
7 -0.493 -29.81 -0.168 -0.493 -29.70 -0.134
8 -0.377 -21.94 -0.132 -0.375 -21.92 -0.106
9 -0.204 -12.62 -0.074 -0.202 -12.47 -0.060
Income Log-Growth Rate 0.041 5.44 0.015 0.041 5.43 0.013

Wealth dummies by wealth type

Housing 0.104 8.22 0.039 0.105 8.29 0.034
Forest -0.086 -1.89 -0.032 -0.086 -1.90 -0.026
Private equity -0.171 -7.56 -0.062 -0.172 -7.58 -0.051
Foreign assets excluding equity 0.326 1.37 0.127 0.329 1.39 0.114

Net Worth decile

No Net Worth -1.705 -52.17 -0.605 -1.704 -51.89 -0.591
Lowest -0.273 -6.95 -0.097 -0.271 -6.87 -0.078
2 -0.454 -12.09 -0.153 -0.453 -12.03 -0.121
3 -0.635 -17.91 -0.202 -0.634 -17.85 -0.156
4 -0.743 -20.85 -0.228 -0.743 -20.82 -0.174
5 -0.785 -22.82 -0.238 -0.784 -22.73 -0.180
6 -0.756 -21.92 -0.231 -0.756 -21.79 -0.176
7 -0.721 -20.18 -0.223 -0.721 -20.11 -0.171
8 -0.617 -18.01 -0.198 -0.617 -18.00 -0.153
9 -0.430 -13.35 -0.146 -0.430 -13.28 -0.116

Other demographics
Swedish speaker 0.137 4.86 0.052 0.135 4.80 0.044
Married 0.011 0.71 0.004 0.011 0.73 0.004
Cohabitor 0.017 0.72 0.006 0.016 0.66 0.005
Kids -0.182 -10.90 -0.067 -0.182 -10.84 -0.056

Occupation
Entrepreneur -0.244 -9.35 -0.087 -0.246 -9.41 -0.072
Farmer -0.301 -5.27 -0.106 -0.301 -5.28 -0.085
Finance professional 0.491 10.40 0.193 0.492 10.39 0.177
Unemployed -0.371 -22.42 -0.130 -0.373 -22.52 -0.105
Cohort Fixed Effects Yes Yes
Baseline probability 0.362 0.249
2
Wald-χ (IQ1 = … = IQ8 = 0) 2,040.7
Pseudo R-squared 0.200 0.200
N 158,044 158,044  
 16 (44)

Panel B: Wealth variables omitted

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.102 45.59 0.033
Lowest -0.807 -29.90 -0.245
2 -0.674 -31.11 -0.214
3 -0.558 -25.90 -0.185
4 -0.449 -25.16 -0.154
5 -0.328 -18.81 -0.116
6 -0.207 -12.61 -0.075
7 -0.118 -7.41 -0.044
8 -0.055 -3.03 -0.021

Education
Basic -0.008 -7.86 -0.003 -0.008 -7.91 -0.003
Vocational -0.015 -12.78 -0.006 -0.015 -12.70 -0.005
Matricular 0.001 0.43 0.000 0.001 0.32 0.000

Ordinary income decile

No Income -0.384 -11.82 -0.135 -0.384 -11.83 -0.110
Lowest -0.538 -25.44 -0.184 -0.538 -25.42 -0.149
2 -0.624 -31.93 -0.209 -0.624 -31.92 -0.167
3 -0.616 -31.10 -0.207 -0.617 -31.11 -0.166
4 -0.677 -41.74 -0.224 -0.678 -41.67 -0.179
5 -0.680 -41.76 -0.225 -0.681 -41.78 -0.179
6 -0.602 -35.36 -0.203 -0.602 -35.28 -0.163
7 -0.491 -32.75 -0.170 -0.490 -32.63 -0.138
8 -0.388 -25.78 -0.138 -0.386 -25.67 -0.112
9 -0.212 -15.33 -0.078 -0.210 -15.10 -0.065
Income Log-Growth Rate 0.019 2.57 0.007 0.019 2.58 0.006

Wealth dummies by wealth type

Housing
Forest
Private equity
Foreign assets excluding equity

Net Worth decile

No Net Worth
Lowest
2
3
4
5
6
7
8
9

Other demographics
Swedish speaker 0.234 11.68 0.091 0.232 11.58 0.080
Married 0.042 2.94 0.016 0.043 2.94 0.014
Cohabitor -0.001 -0.04 0.000 -0.002 -0.09 -0.001
Kids -0.093 -5.78 -0.035 -0.093 -5.74 -0.030

Occupation
Entrepreneur -0.115 -4.94 -0.043 -0.117 -5.00 -0.037
Farmer 0.426 11.37 0.168 0.425 11.36 0.154
Finance professional 0.431 10.72 0.170 0.432 10.68 0.157
Unemployed -0.422 -25.68 -0.148 -0.424 -25.81 -0.121
Cohort Fixed Effects Yes Yes
Baseline probability 0.374 0.263
2
Wald-χ (IQ1 = … = IQ8 = 0) 2,173.1
Pseudo R-squared 0.096 0.096
N 158,044 158,044
 17 (44)

Panel C: Income variables omitted

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.109 50.65 0.034
Lowest -0.840 -29.23 -0.243
2 -0.708 -33.33 -0.216
3 -0.588 -26.35 -0.187
4 -0.461 -27.89 -0.153
5 -0.330 -19.92 -0.114
6 -0.192 -11.55 -0.069
7 -0.100 -5.87 -0.037
8 -0.033 -1.78 -0.012

Education
Basic -0.009 -8.24 -0.004 -0.010 -8.28 -0.003
Vocational -0.019 -16.94 -0.007 -0.019 -16.79 -0.006
Matricular -0.004 -2.35 -0.002 -0.005 -2.37 -0.001

Ordinary income decile

No Income
Lowest
2
3
4
5
6
7
8
9
Income Log-Growth Rate

Wealth dummies by wealth type

Housing 0.216 19.24 0.081 0.217 19.37 0.070
Forest -0.082 -1.76 -0.030 -0.081 -1.75 -0.025
Private equity -0.182 -7.91 -0.065 -0.182 -7.93 -0.054
Foreign assets excluding equity 0.306 1.24 0.119 0.309 1.27 0.107

Net Worth decile

No Net Worth -1.639 -50.20 -0.587 -1.636 -49.91 -0.570
Lowest -0.233 -5.93 -0.083 -0.229 -5.82 -0.067
2 -0.425 -11.83 -0.144 -0.423 -11.72 -0.114
3 -0.605 -17.73 -0.193 -0.603 -17.61 -0.150
4 -0.717 -20.61 -0.220 -0.715 -20.55 -0.169
5 -0.752 -22.75 -0.228 -0.749 -22.58 -0.175
6 -0.729 -21.74 -0.223 -0.728 -21.54 -0.171
7 -0.690 -19.65 -0.214 -0.689 -19.56 -0.165
8 -0.578 -16.68 -0.186 -0.578 -16.64 -0.146
9 -0.398 -12.49 -0.136 -0.397 -12.38 -0.108

Other demographics
Swedish speaker 0.142 6.97 0.054 0.139 6.85 0.046
Married 0.060 3.88 0.022 0.060 3.88 0.019
Cohabitor 0.021 0.92 0.008 0.020 0.83 0.006
Kids -0.118 -7.23 -0.044 -0.117 -7.18 -0.036

Occupation
Entrepreneur -0.233 -8.82 -0.083 -0.235 -8.90 -0.068
Farmer -0.233 -4.16 -0.083 -0.234 -4.19 -0.068
Finance professional 0.591 12.74 0.232 0.592 12.71 0.216
Unemployed -0.436 -27.32 -0.149 -0.440 -27.48 -0.120
Cohort Fixed Effects Yes Yes
Baseline probability 0.357 0.248
2
Wald-χ (IQ1 = … = IQ8 = 0) 2,779.3
Pseudo R-squared 0.200 0.200
N 158,044 158,044  
 18 (44)

Panel D: IQ variables omitted

Marginal
Independent variables Coefficients z -values Effects
Education
Basic -0.009 -7.68 -0.003
Vocational -0.017 -16.36 -0.006
Matricular 0.000 -0.01 0.000

Ordinary income decile

No Income -0.412 -12.62 -0.112
Lowest -0.565 -27.59 -0.149
2 -0.640 -31.05 -0.165
3 -0.642 -32.07 -0.165
4 -0.719 -42.39 -0.179
5 -0.733 -40.52 -0.182
6 -0.643 -34.99 -0.165
7 -0.526 -31.29 -0.141
8 -0.395 -23.51 -0.111
9 -0.205 -12.77 -0.061
Income Log-Growth Rate 0.038 5.08 0.012

Wealth dummies by wealth type

Housing 0.154 13.80 0.049
Forest -0.084 -1.84 -0.026
Private equity -0.171 -7.56 -0.051
Foreign assets excluding equity 0.333 1.43 0.116

Net Worth decile

No Net Worth -1.657 -49.27 -0.577
Lowest -0.223 -5.61 -0.065
2 -0.411 -10.95 -0.112
3 -0.593 -17.04 -0.149
4 -0.701 -19.50 -0.168
5 -0.741 -22.03 -0.174
6 -0.716 -20.60 -0.170
7 -0.681 -19.10 -0.165
8 -0.579 -16.99 -0.147
9 -0.396 -12.18 -0.108

Other demographics
Swedish speaker 0.145 7.67 0.048
Married 0.055 3.43 0.018
Cohabitor 0.016 0.66 0.005
Kids -0.153 -9.15 -0.048

Occupation
Entrepreneur -0.256 -9.81 -0.074
Farmer -0.201 -3.51 -0.059
Finance professional 0.476 10.11 0.171
Unemployed -0.402 -24.85 -0.112
Cohort Fixed Effects Yes
Baseline probability 0.249
Pseudo R-squared 0.201
N 158,044
 19 (44)

Table IA.10: Alternative version of Table 2 estimated using all individuals in the data, including those without
IQ data. This regression omits IQ variables.

All investors Males only

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
Male -0.048 -8.86 -0.017

Education
Basic -0.011 -9.39 -0.004 -0.012 -9.64 -0.004
Vocational -0.013 -11.71 -0.005 -0.014 -11.92 -0.005
Matricular 0.001 1.02 0.000 0.001 1.07 0.000

Ordinary income decile

No Income -0.478 -29.65 -0.147 -0.382 -20.95 -0.122
Lowest -0.780 -53.09 -0.220 -0.725 -47.27 -0.210
2 -0.826 -53.95 -0.229 -0.788 -49.64 -0.222
3 -0.690 -55.45 -0.200 -0.694 -45.60 -0.201
4 -0.581 -55.78 -0.175 -0.614 -51.29 -0.183
5 -0.567 -59.54 -0.171 -0.575 -53.50 -0.174
6 -0.516 -55.52 -0.158 -0.540 -48.27 -0.165
7 -0.430 -52.18 -0.135 -0.479 -44.81 -0.150
8 -0.338 -42.50 -0.109 -0.384 -41.39 -0.124
9 -0.212 -28.49 -0.071 -0.223 -26.54 -0.075
Income Log-Growth Rate 0.030 8.42 0.011 0.050 10.39 0.017

Wealth dummies by wealth type

Housing -0.069 -6.40 -0.024 0.034 3.05 0.012
Forest -0.148 -13.08 -0.050 -0.078 -4.73 -0.027
Private equity -0.071 -8.19 -0.024 -0.078 -6.64 -0.027
Foreign assets excluding equity 0.239 2.62 0.088 0.132 1.34 0.048

Net Worth decile

No Net Worth -1.951 -106.20 -0.630 -1.927 -98.98 -0.629
Lowest -0.519 -31.05 -0.156 -0.525 -27.44 -0.160
2 -0.805 -47.76 -0.218 -0.880 -45.47 -0.234
3 -1.105 -69.01 -0.265 -1.087 -57.64 -0.265
4 -1.099 -63.78 -0.264 -1.061 -53.51 -0.261
5 -0.998 -64.71 -0.250 -0.941 -51.70 -0.243
6 -0.898 -55.77 -0.234 -0.844 -45.91 -0.227
7 -0.756 -50.10 -0.209 -0.724 -41.00 -0.204
8 -0.613 -48.13 -0.179 -0.587 -36.39 -0.174
9 -0.419 -35.26 -0.131 -0.396 -25.74 -0.126

Other demographics
Swedish speaker -0.004 -0.15 -0.001 -0.002 -0.08 -0.001
Married -0.129 -16.62 -0.045 -0.002 -0.26 -0.001
Cohabitor -0.085 -9.05 -0.029 -0.046 -3.51 -0.016
Kids -0.035 -6.25 -0.012 -0.069 -8.78 -0.024

Occupation
Entrepreneur -0.124 -10.64 -0.042 -0.152 -11.26 -0.052
Farmer -0.012 -0.60 -0.004 -0.075 -2.96 -0.026
Finance professional 0.352 17.20 0.132 0.412 13.81 0.157
Unemployed -0.177 -24.09 -0.060 -0.220 -23.59 -0.074
Cohort Fixed Effects Yes Yes
Baseline probability 0.306 0.311
Pseudo R-squared 0.231 0.250
N 1,151,607 545,700
 20 (44)

Table IA.11: Alternative versions of Table 2 with different versions of the intelligence score. Panel A replaces
the composite intelligence score with its ‘logical ability’ subcomponent; Panel B uses the ‘verbal ability’
subcomponent; Panel C uses the ‘numerical ability’ subcomponent; and Panel D includes all three
subcomponents simultaneously as separate (linear) variables.

Panel A: Logical ability

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
Logical ability stanine 0.065 32.08 0.021
Lowest -0.477 -17.95 -0.143
2 -0.391 -16.42 -0.121
3 -0.312 -14.48 -0.100
4 -0.221 -10.66 -0.073
5 -0.150 -8.19 -0.051
6 -0.098 -5.11 -0.034
7 -0.024 -1.20 -0.008
8 -0.009 -0.40 -0.003

Education
Basic -0.008 -6.62 -0.003 -0.008 -6.67 -0.002
Vocational -0.016 -15.24 -0.006 -0.016 -15.17 -0.005
Matricular 0.000 -0.02 0.000 0.000 -0.13 0.000

Ordinary income decile

No Income -0.379 -11.55 -0.119 -0.382 -11.63 -0.105
Lowest -0.523 -26.08 -0.160 -0.526 -26.11 -0.140
2 -0.594 -29.37 -0.178 -0.597 -29.41 -0.155
3 -0.592 -29.70 -0.177 -0.595 -29.83 -0.155
4 -0.649 -38.73 -0.191 -0.652 -38.87 -0.166
5 -0.660 -36.97 -0.194 -0.662 -37.07 -0.168
6 -0.579 -31.93 -0.174 -0.581 -31.86 -0.152
7 -0.473 -28.31 -0.147 -0.474 -28.35 -0.129
8 -0.359 -21.28 -0.115 -0.359 -21.33 -0.102
9 -0.187 -11.66 -0.063 -0.187 -11.66 -0.056
Income Log-Growth Rate 0.033 4.36 0.012 0.033 4.31 0.010

Wealth dummies by wealth type

Housing 0.151 13.59 0.053 0.151 13.65 0.048
Forest -0.079 -1.73 -0.027 -0.079 -1.73 -0.024
Private equity -0.172 -7.56 -0.058 -0.172 -7.55 -0.051
Foreign assets excluding equity 0.316 1.35 0.118 0.320 1.37 0.111

Net Worth decile

No Net Worth -1.644 -48.98 -0.587 -1.644 -48.92 -0.572
Lowest -0.214 -5.38 -0.071 -0.213 -5.36 -0.063
2 -0.402 -10.81 -0.125 -0.403 -10.81 -0.110
3 -0.585 -16.78 -0.170 -0.585 -16.75 -0.147
4 -0.695 -19.26 -0.194 -0.696 -19.29 -0.166
5 -0.735 -21.78 -0.202 -0.733 -21.73 -0.172
6 -0.710 -20.39 -0.197 -0.710 -20.36 -0.169
7 -0.675 -18.68 -0.190 -0.675 -18.68 -0.163
8 -0.570 -16.57 -0.167 -0.571 -16.56 -0.144
9 -0.392 -12.05 -0.122 -0.392 -12.03 -0.107

Other demographics
Swedish speaker 0.138 7.33 0.050 0.135 7.17 0.044
Married 0.036 2.26 0.013 0.036 2.24 0.011
Cohabitor 0.023 0.96 0.008 0.022 0.93 0.007
Kids -0.147 -8.77 -0.051 -0.146 -8.73 -0.045

Occupation
Entrepreneur -0.246 -9.39 -0.080 -0.246 -9.39 -0.071
Farmer -0.189 -3.32 -0.063 -0.189 -3.32 -0.056
Finance professional 0.468 9.95 0.178 0.471 9.98 0.168
Unemployed -0.363 -22.40 -0.116 -0.364 -22.43 -0.102
Cohort Fixed Effects Yes Yes
Baseline probability 0.305 0.248
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,160.9
Pseudo R-squared 0.2061 0.2058
N 158,044 158,044
 21 (44)

Panel B: Verbal ability

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
Verbal ability stanine 0.070 33.26 0.022
Lowest -0.551 -19.91 -0.162
2 -0.446 -21.41 -0.136
3 -0.395 -19.33 -0.123
4 -0.283 -15.89 -0.092
5 -0.215 -13.74 -0.071
6 -0.107 -6.59 -0.037
7 -0.063 -3.83 -0.022
8 -0.005 -0.35 -0.002

Education
Basic -0.007 -6.12 -0.002 -0.007 -6.14 -0.002
Vocational -0.016 -14.72 -0.006 -0.016 -14.65 -0.005
Matricular 0.000 -0.01 0.000 0.000 -0.03 0.000

Ordinary income decile

No Income -0.383 -11.59 -0.121 -0.379 -11.48 -0.104
Lowest -0.523 -25.83 -0.161 -0.519 -25.68 -0.139
2 -0.589 -28.93 -0.178 -0.585 -28.81 -0.153
3 -0.585 -29.08 -0.177 -0.582 -28.91 -0.152
4 -0.634 -37.39 -0.189 -0.632 -37.26 -0.162
5 -0.641 -35.82 -0.191 -0.639 -35.90 -0.164
6 -0.558 -30.13 -0.170 -0.555 -30.12 -0.147
7 -0.456 -27.09 -0.143 -0.452 -26.90 -0.124
8 -0.343 -20.22 -0.111 -0.339 -20.01 -0.097
9 -0.177 -10.94 -0.060 -0.173 -10.70 -0.052
Income Log-Growth Rate 0.028 3.80 0.010 0.029 3.84 0.009

Wealth dummies by wealth type

Housing 0.152 13.90 0.054 0.153 13.92 0.049
Forest -0.088 -1.93 -0.030 -0.087 -1.91 -0.027
Private equity -0.173 -7.56 -0.058 -0.174 -7.58 -0.052
Foreign assets excluding equity 0.315 1.31 0.118 0.324 1.35 0.112

Net Worth decile

No Net Worth -1.653 -50.04 -0.590 -1.652 -49.80 -0.575
Lowest -0.225 -5.66 -0.074 -0.223 -5.61 -0.065
2 -0.416 -11.26 -0.130 -0.415 -11.20 -0.112
3 -0.597 -17.29 -0.174 -0.597 -17.21 -0.149
4 -0.706 -19.81 -0.197 -0.706 -19.77 -0.168
5 -0.745 -22.24 -0.205 -0.745 -22.13 -0.174
6 -0.720 -20.95 -0.200 -0.720 -20.86 -0.170
7 -0.681 -19.09 -0.193 -0.682 -19.08 -0.164
8 -0.580 -16.93 -0.170 -0.581 -16.88 -0.146
9 -0.398 -12.35 -0.125 -0.398 -12.31 -0.108

Other demographics
Swedish speaker 0.166 8.46 0.060 0.165 8.44 0.055
Married 0.031 1.94 0.011 0.030 1.89 0.009
Cohabitor 0.028 1.20 0.010 0.027 1.12 0.008
Kids -0.140 -8.41 -0.049 -0.139 -8.36 -0.043

Occupation
Entrepreneur -0.232 -8.77 -0.077 -0.234 -8.85 -0.068
Farmer -0.192 -3.36 -0.064 -0.193 -3.37 -0.057
Finance professional 0.444 9.38 0.169 0.445 9.39 0.158
Unemployed -0.351 -21.81 -0.113 -0.353 -21.91 -0.100
Cohort Fixed Effects Yes Yes
Baseline probability 0.309 0.247
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,243.4
Pseudo R-squared 0.2077 0.2073
N 158,044 158,044
 22 (44)

Panel C: Numerical ability

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
Numerical ability stanine 0.088 39.91 0.028
Lowest -0.727 -25.35 -0.216
2 -0.603 -24.16 -0.188
3 -0.507 -25.13 -0.163
4 -0.400 -20.57 -0.133
5 -0.287 -15.57 -0.099
6 -0.210 -12.12 -0.074
7 -0.132 -7.24 -0.047
8 -0.075 -3.93 -0.027

Education
Basic -0.007 -5.84 -0.002 -0.007 -5.87 -0.002
Vocational -0.016 -14.46 -0.006 -0.016 -14.39 -0.005
Matricular 0.000 -0.12 0.000 0.000 -0.19 0.000

Ordinary income decile

No Income -0.356 -10.78 -0.121 -0.356 -10.79 -0.098
Lowest -0.491 -24.62 -0.163 -0.491 -24.60 -0.132
2 -0.561 -27.99 -0.184 -0.561 -27.98 -0.147
3 -0.556 -27.60 -0.182 -0.556 -27.58 -0.146
4 -0.597 -35.05 -0.193 -0.598 -35.00 -0.155
5 -0.601 -33.36 -0.195 -0.602 -33.37 -0.156
6 -0.523 -28.41 -0.173 -0.523 -28.49 -0.139
7 -0.427 -25.42 -0.145 -0.426 -25.30 -0.117
8 -0.324 -19.11 -0.112 -0.321 -19.00 -0.092
9 -0.167 -10.44 -0.060 -0.165 -10.32 -0.049
Income Log-Growth Rate 0.029 3.85 0.011 0.029 3.83 0.009

Wealth dummies by wealth type

Housing 0.146 13.43 0.054 0.146 13.49 0.047
Forest -0.088 -1.93 -0.032 -0.088 -1.93 -0.027
Private equity -0.173 -7.49 -0.062 -0.173 -7.50 -0.051
Foreign assets excluding equity 0.320 1.35 0.124 0.313 1.32 0.108

Net Worth decile

No Net Worth -1.634 -49.27 -0.586 -1.632 -49.21 -0.568
Lowest -0.211 -5.33 -0.075 -0.210 -5.28 -0.061
2 -0.400 -10.85 -0.134 -0.400 -10.81 -0.108
3 -0.586 -16.88 -0.185 -0.585 -16.84 -0.146
4 -0.694 -19.36 -0.212 -0.694 -19.34 -0.165
5 -0.735 -21.92 -0.221 -0.734 -21.89 -0.172
6 -0.707 -20.48 -0.214 -0.706 -20.42 -0.167
7 -0.676 -18.89 -0.207 -0.675 -18.86 -0.162
8 -0.574 -16.69 -0.182 -0.574 -16.70 -0.144
9 -0.391 -12.08 -0.132 -0.391 -12.06 -0.106

Other demographics
Swedish speaker 0.138 7.19 0.052 0.137 7.11 0.045
Married 0.028 1.78 0.011 0.028 1.77 0.009
Cohabitor 0.027 1.12 0.010 0.026 1.10 0.008
Kids -0.141 -8.36 -0.051 -0.140 -8.34 -0.043

Occupation
Entrepreneur -0.232 -8.98 -0.082 -0.233 -9.00 -0.068
Farmer -0.183 -3.20 -0.065 -0.183 -3.20 -0.054
Finance professional 0.430 9.11 0.168 0.428 9.05 0.152
Unemployed -0.339 -21.12 -0.117 -0.341 -21.19 -0.096
Cohort Fixed Effects Yes Yes
Baseline probability 0.348 0.246
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,611.1
Pseudo R-squared 0.2113 0.2111
N 158,044 158,044
 23 (44)

Panel D: All ability subcomponents

Linear IQ Specification
Marginal
Independent variables Coefficients z -values Effects
Ability type
Numerical 0.067 20.84 0.021
Logical 0.013 4.91 0.004
Verbal 0.022 7.83 0.007

Education
Basic -0.006 -5.61 -0.002
Vocational -0.015 -14.09 -0.005
Matricular 0.000 -0.18 0.000

Ordinary income decile

No Income -0.353 -10.68 -0.098
Lowest -0.487 -24.40 -0.131
2 -0.554 -27.65 -0.146
3 -0.548 -27.20 -0.144
4 -0.586 -34.44 -0.152
5 -0.589 -32.97 -0.153
6 -0.511 -27.83 -0.137
7 -0.416 -24.73 -0.115
8 -0.314 -18.54 -0.090
9 -0.161 -10.04 -0.048
Income Log-Growth Rate 0.027 3.59 0.008

Wealth dummies by wealth type

Housing 0.147 13.58 0.047
Forest -0.087 -1.91 -0.027
Private equity -0.174 -7.52 -0.052
Foreign assets excluding equity 0.313 1.32 0.108

Net Worth decile

No Net Worth -1.634 -49.41 -0.569
Lowest -0.211 -5.32 -0.062
2 -0.402 -10.91 -0.109
3 -0.587 -16.89 -0.147
4 -0.697 -19.41 -0.165
5 -0.736 -21.91 -0.172
6 -0.709 -20.52 -0.167
7 -0.676 -18.84 -0.162
8 -0.574 -16.65 -0.144
9 -0.392 -12.10 -0.107

Other demographics
Swedish speaker 0.143 7.41 0.047
Married 0.023 1.45 0.007
Cohabitor 0.029 1.19 0.009
Kids -0.137 -8.20 -0.042

Occupation
Entrepreneur -0.230 -8.80 -0.067
Farmer -0.182 -3.20 -0.054
Finance professional 0.429 9.05 0.152
Unemployed -0.333 -20.64 -0.094
Cohort Fixed Effects Yes
Baseline probability 0.246
Pseudo R-squared 0.212
N 158,044
 24 (44)

Table IA.12: Alternative versions of Table 2 estimated from age-grouped individuals. Panel A uses individuals
born between 1953 and 1969. Panel B uses individuals born between 1970 and 1982.

Panel A: 1953-1969 Cohort

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.078 26.96 0.026
Lowest -0.606 -16.64 -0.189
2 -0.522 -16.79 -0.168
3 -0.394 -12.91 -0.132
4 -0.312 -11.49 -0.107
5 -0.203 -7.81 -0.072
6 -0.110 -4.12 -0.040
7 -0.080 -2.85 -0.029
8 -0.024 -0.74 -0.009

Education
Basic -0.006 -3.63 -0.002 -0.006 -3.68 -0.002
Vocational -0.014 -9.42 -0.005 -0.014 -9.37 -0.005
Matricular 0.004 1.68 0.002 0.004 1.74 0.001

Ordinary income decile

No Income -0.379 -7.08 -0.128 -0.375 -6.98 -0.109
Lowest -0.544 -13.91 -0.176 -0.543 -13.92 -0.149
2 -0.699 -21.57 -0.216 -0.699 -21.61 -0.182
3 -0.560 -19.42 -0.181 -0.559 -19.42 -0.154
4 -0.567 -23.60 -0.185 -0.567 -23.55 -0.157
5 -0.552 -24.81 -0.181 -0.551 -24.85 -0.155
6 -0.483 -23.24 -0.162 -0.481 -23.05 -0.139
7 -0.404 -18.96 -0.139 -0.399 -18.74 -0.119
8 -0.320 -16.34 -0.112 -0.314 -16.14 -0.096
9 -0.180 -10.15 -0.065 -0.174 -9.90 -0.055
Income Log-Growth Rate -0.011 -0.71 -0.004 -0.010 -0.65 -0.003

Wealth dummies by wealth type

Housing 0.222 18.76 0.082 0.223 18.85 0.073
Forest -0.041 -0.76 -0.015 -0.044 -0.81 -0.014
Private equity -0.086 -3.48 -0.031 -0.086 -3.47 -0.028
Foreign assets excluding equity 0.400 1.34 0.156 0.409 1.38 0.150

Net Worth decile

No Net Worth -1.478 -41.40 -0.537 -1.475 -41.03 -0.513
Lowest -0.742 -14.20 -0.222 -0.739 -14.11 -0.185
2 -0.650 -14.19 -0.202 -0.647 -14.04 -0.169
3 -0.800 -18.78 -0.236 -0.798 -18.63 -0.195
4 -0.791 -17.29 -0.234 -0.789 -17.19 -0.194
5 -0.818 -21.37 -0.240 -0.815 -21.17 -0.199
6 -0.756 -18.01 -0.227 -0.755 -17.87 -0.189
7 -0.690 -16.40 -0.213 -0.689 -16.31 -0.178
8 -0.569 -13.65 -0.183 -0.569 -13.59 -0.155
9 -0.387 -10.69 -0.131 -0.386 -10.62 -0.113

Other demographics
Swedish speaker 0.098 3.43 0.037 0.097 3.37 0.033
Married 0.034 1.75 0.013 0.035 1.77 0.011
Cohabitor 0.070 2.52 0.026 0.069 2.49 0.023
Kids -0.120 -6.18 -0.044 -0.119 -6.15 -0.039

Occupation
Entrepreneur -0.129 -4.50 -0.047 -0.131 -4.57 -0.042
Farmer -0.158 -2.37 -0.057 -0.156 -2.34 -0.049
Finance professional 0.328 6.02 0.127 0.329 6.02 0.118
Unemployed -0.271 -10.76 -0.095 -0.272 -10.79 -0.084
Cohort Fixed Effects Yes Yes
Baseline probability 0.350 0.271
2
Wald-χ (IQ1 = … = IQ8 = 0) 835.7
Pseudo R-squared 0.1897 0.1892
N 75,410 75,410
 25 (44)

Panel B: 1970-1982 Cohort

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.098 29.72 0.029
Lowest -0.805 -16.74 -0.213
2 -0.610 -18.03 -0.176
3 -0.535 -17.08 -0.159
4 -0.397 -17.22 -0.124
5 -0.298 -13.81 -0.096
6 -0.170 -8.88 -0.057
7 -0.062 -2.91 -0.022
8 -0.014 -0.63 -0.005

Education
Basic -0.007 -4.65 -0.003 -0.007 -4.64 -0.002
Vocational -0.016 -11.56 -0.006 -0.016 -11.49 -0.005
Matricular -0.002 -1.09 -0.001 -0.002 -1.15 -0.001

Ordinary income decile

No Income -0.400 -7.31 -0.126 -0.399 -7.33 -0.102
Lowest -0.545 -16.39 -0.171 -0.544 -16.35 -0.139
2 -0.586 -16.55 -0.180 -0.583 -16.50 -0.145
3 -0.607 -17.59 -0.186 -0.606 -17.56 -0.150
4 -0.647 -19.94 -0.194 -0.647 -19.88 -0.156
5 -0.669 -18.31 -0.198 -0.669 -18.28 -0.158
6 -0.587 -16.13 -0.177 -0.585 -16.11 -0.142
7 -0.482 -14.39 -0.150 -0.480 -14.34 -0.121
8 -0.351 -10.09 -0.113 -0.347 -10.01 -0.092
9 -0.156 -4.87 -0.053 -0.153 -4.78 -0.043
Income Log-Growth Rate 0.042 4.65 0.015 0.041 4.68 0.012

Wealth dummies by wealth type

Housing 0.058 3.07 0.021 0.059 3.10 0.018
Forest -0.219 -2.47 -0.073 -0.214 -2.42 -0.059
Private equity -0.343 -7.76 -0.110 -0.343 -7.77 -0.090
Foreign assets excluding equity 0.152 0.28 0.056 0.144 0.26 0.046

Net Worth decile

No Net Worth -1.906 -31.87 -0.656 -1.903 -31.96 -0.654
Lowest -0.025 -0.39 -0.009 -0.022 -0.34 -0.006
2 -0.307 -4.93 -0.099 -0.305 -4.91 -0.081
3 -0.472 -7.43 -0.145 -0.471 -7.44 -0.116
4 -0.662 -10.84 -0.188 -0.660 -10.85 -0.149
5 -0.670 -9.74 -0.190 -0.669 -9.77 -0.150
6 -0.680 -11.21 -0.192 -0.679 -11.21 -0.151
7 -0.680 -10.22 -0.192 -0.681 -10.25 -0.151
8 -0.610 -9.01 -0.177 -0.611 -9.08 -0.140
9 -0.432 -6.06 -0.134 -0.429 -6.05 -0.107

Other demographics
Swedish speaker 0.185 8.63 0.068 0.181 8.44 0.057
Married 0.014 0.68 0.005 0.015 0.69 0.004
Cohabitor -0.049 -1.20 -0.017 -0.050 -1.23 -0.015
Kids -0.184 -6.64 -0.062 -0.185 -6.69 -0.053

Occupation
Entrepreneur -0.426 -8.12 -0.132 -0.429 -8.14 -0.108
Farmer -0.244 -2.28 -0.080 -0.248 -2.32 -0.067
Finance professional 0.628 8.12 0.242 0.628 8.16 0.224
Unemployed -0.341 -14.92 -0.111 -0.346 -15.16 -0.092
Cohort Fixed Effects Yes Yes
Baseline probability 0.310 0.225
2
Wald-χ (IQ1 = … = IQ8 = 0) 971.4
Pseudo R-squared 0.2458 0.2453
N 82,634 82,634
 26 (44)

Table IA.13: Alternative versions of Table 2 when years prior to 2000 define stock market participation. An
individual’s stock market participation status is based on the end-of-1998 (Panel A) or end-of-1999 (Panel B)
holdings. (The tables in the paper use end-of-2000 holdings.) Panel C uses the end-of-2000 holdings but does
not count Nokia towards stock market participation.

Panel A: End-of-1998 Participation

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.112 41.72 0.026
Lowest -0.883 -23.90 -0.190
2 -0.746 -27.93 -0.172
3 -0.643 -27.31 -0.156
4 -0.503 -24.61 -0.131
5 -0.373 -19.44 -0.102
6 -0.233 -12.97 -0.068
7 -0.146 -7.96 -0.044
8 -0.061 -3.30 -0.019

Education
Basic -0.008 -6.39 -0.003 -0.008 -6.40 -0.002
Vocational -0.017 -14.35 -0.005 -0.017 -14.05 -0.004
Matricular -0.001 -0.62 0.000 -0.002 -0.68 0.000

Ordinary income decile

No Income -0.202 -7.11 -0.060 -0.203 -7.15 -0.043
Lowest -0.314 -11.60 -0.090 -0.316 -11.64 -0.064
2 -0.394 -16.02 -0.111 -0.395 -16.09 -0.078
3 -0.383 -16.80 -0.108 -0.384 -16.89 -0.076
4 -0.414 -18.75 -0.116 -0.416 -18.86 -0.081
5 -0.495 -24.16 -0.135 -0.497 -24.41 -0.094
6 -0.468 -22.02 -0.128 -0.469 -22.07 -0.090
7 -0.388 -18.31 -0.110 -0.388 -18.35 -0.077
8 -0.306 -17.23 -0.089 -0.305 -17.22 -0.063
9 -0.164 -8.83 -0.050 -0.162 -8.76 -0.036
Income Log-Growth Rate

Wealth dummies by wealth type

Housing 0.109 8.04 0.035 0.109 8.08 0.026
Forest 0.000 0.01 0.000 0.001 0.02 0.000
Private equity -0.021 -0.79 -0.006 -0.021 -0.79 -0.005
Foreign assets excluding equity 0.405 1.14 0.144 0.417 1.17 0.118

Net Worth decile

No Net Worth -1.500 -44.15 -0.528 -1.499 -44.14 -0.459
Lowest -0.580 -15.11 -0.147 -0.578 -15.06 -0.099
2 -0.849 -21.41 -0.191 -0.848 -21.43 -0.125
3 -0.605 -17.07 -0.151 -0.604 -17.03 -0.102
4 -0.634 -18.74 -0.157 -0.633 -18.73 -0.105
5 -0.649 -21.25 -0.160 -0.648 -21.16 -0.107
6 -0.675 -19.36 -0.164 -0.673 -19.31 -0.110
7 -0.685 -20.63 -0.166 -0.684 -20.60 -0.111
8 -0.605 -17.34 -0.152 -0.605 -17.32 -0.102
9 -0.411 -12.75 -0.112 -0.411 -12.73 -0.078

Other demographics
Swedish speaker 0.159 9.58 0.053 0.156 9.38 0.039
Married 0.028 1.45 0.009 0.029 1.51 0.007
Cohabitor 0.007 0.23 0.002 0.006 0.20 0.001
Kids -0.098 -5.08 -0.031 -0.099 -5.12 -0.023

Occupation
Entrepreneur -0.077 -2.67 -0.024 -0.078 -2.70 -0.018
Farmer -0.090 -1.51 -0.028 -0.091 -1.53 -0.020
Finance professional 0.489 12.36 0.176 0.490 12.34 0.143
Unemployed
Cohort Fixed Effects Yes Yes
Baseline probability 0.250 0.151
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,834.9
Pseudo R-squared 0.174 0.174
N 145,031 145,031
 27 (44)

Panel B: End-of-1999 Participation

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.083 38.32 0.023
Lowest -0.669 -23.65 -0.175
2 -0.565 -24.52 -0.155
3 -0.451 -21.11 -0.130
4 -0.366 -18.67 -0.109
5 -0.265 -16.63 -0.082
6 -0.163 -8.90 -0.052
7 -0.103 -5.96 -0.034
8 -0.050 -2.45 -0.017

Education
Basic -0.005 -2.98 -0.002 -0.005 -3.05 -0.001
Vocational -0.017 -11.53 -0.006 -0.017 -11.47 -0.005
Matricular 0.001 0.57 0.000 0.001 0.45 0.000

Ordinary income decile

No Income -0.397 -13.62 -0.118 -0.397 -13.62 -0.094
Lowest -0.420 -17.07 -0.126 -0.420 -17.15 -0.101
2 -0.473 -21.76 -0.140 -0.474 -21.83 -0.112
3 -0.406 -17.09 -0.123 -0.408 -17.13 -0.098
4 -0.455 -22.84 -0.135 -0.456 -22.94 -0.108
5 -0.510 -26.44 -0.149 -0.511 -26.40 -0.118
6 -0.471 -24.36 -0.139 -0.471 -24.42 -0.111
7 -0.360 -19.44 -0.110 -0.359 -19.50 -0.089
8 -0.284 -15.81 -0.089 -0.282 -15.77 -0.072
9 -0.169 -9.95 -0.055 -0.167 -9.90 -0.044
Income Log-Growth Rate

Wealth dummies by wealth type

Housing 0.111 8.02 0.038 0.111 8.04 0.032
Forest -0.174 -3.46 -0.056 -0.174 -3.46 -0.045
Private equity -0.184 -6.77 -0.059 -0.184 -6.77 -0.048
Foreign assets excluding equity -0.019 -0.09 -0.006 -0.012 -0.06 -0.003

Net Worth decile

No Net Worth -1.833 -50.11 -0.639 -1.831 -50.05 -0.612
Lowest -0.854 -21.35 -0.209 -0.851 -21.28 -0.159
2 -0.890 -23.30 -0.214 -0.889 -23.22 -0.163
3 -0.652 -17.43 -0.174 -0.651 -17.43 -0.135
4 -0.838 -23.81 -0.207 -0.837 -23.72 -0.158
5 -0.862 -23.25 -0.210 -0.861 -23.19 -0.160
6 -0.847 -22.32 -0.208 -0.846 -22.34 -0.159
7 -0.749 -19.93 -0.192 -0.747 -19.84 -0.148
8 -0.621 -17.13 -0.168 -0.620 -17.12 -0.131
9 -0.396 -12.11 -0.117 -0.395 -12.06 -0.093

Other demographics
Swedish speaker 0.114 4.41 0.040 0.113 4.36 0.033
Married 0.012 0.87 0.004 0.013 0.89 0.004
Cohabitor -0.017 -0.76 -0.006 -0.018 -0.81 -0.005
Kids -0.063 -3.89 -0.021 -0.063 -3.88 -0.017

Occupation
Entrepreneur -0.098 -3.71 -0.032 -0.099 -3.76 -0.027
Farmer -0.136 -2.32 -0.044 -0.136 -2.32 -0.036
Finance professional 0.409 9.48 0.151 0.409 9.48 0.133
Unemployed -0.305 -17.08 -0.095 -0.307 -17.24 -0.077
Cohort Fixed Effects Yes Yes
Baseline probability 0.281 0.201
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,511.7
Pseudo R-squared 0.213 0.213
N 153,178 153,178
 28 (44)

Panel C: End-of-2000 Participation (Nokia holdings excluded)

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.088 40.75 0.028
Lowest -0.703 -24.31 -0.203
2 -0.575 -26.71 -0.174
3 -0.472 -20.99 -0.149
4 -0.366 -21.04 -0.119
5 -0.262 -15.30 -0.088
6 -0.152 -8.84 -0.053
7 -0.076 -4.39 -0.027
8 -0.027 -1.45 -0.010

Education
Basic -0.006 -5.65 -0.002 -0.006 -5.71 -0.002
Vocational -0.015 -14.42 -0.005 -0.015 -14.32 -0.005
Matricular 0.000 -0.02 0.000 0.000 -0.15 0.000

Ordinary income decile

No Income -0.356 -10.80 -0.117 -0.357 -10.80 -0.098
Lowest -0.495 -24.57 -0.159 -0.495 -24.55 -0.132
2 -0.555 -27.75 -0.176 -0.555 -27.73 -0.144
3 -0.548 -26.64 -0.174 -0.549 -26.68 -0.143
4 -0.584 -34.23 -0.183 -0.586 -34.10 -0.151
5 -0.591 -32.90 -0.185 -0.593 -32.93 -0.152
6 -0.511 -27.72 -0.164 -0.511 -27.74 -0.135
7 -0.418 -24.76 -0.138 -0.417 -24.65 -0.114
8 -0.316 -18.20 -0.107 -0.313 -18.13 -0.089
9 -0.159 -9.83 -0.056 -0.156 -9.64 -0.047
Income Log-Growth Rate 0.025 3.28 0.009 0.025 3.28 0.008

Wealth dummies by wealth type

Housing 0.148 13.66 0.054 0.149 13.74 0.047
Forest -0.085 -1.89 -0.030 -0.085 -1.89 -0.026
Private equity -0.173 -7.67 -0.060 -0.173 -7.69 -0.051
Foreign assets excluding equity 0.340 1.44 0.130 0.342 1.46 0.118

Net Worth decile

No Net Worth -1.617 -49.79 -0.581 -1.615 -49.53 -0.561
Lowest -0.190 -4.85 -0.065 -0.187 -4.76 -0.055
2 -0.391 -10.83 -0.127 -0.390 -10.74 -0.105
3 -0.567 -16.48 -0.174 -0.566 -16.41 -0.141
4 -0.679 -19.34 -0.200 -0.679 -19.29 -0.161
5 -0.725 -21.89 -0.210 -0.723 -21.74 -0.168
6 -0.696 -21.02 -0.204 -0.695 -20.86 -0.163
7 -0.663 -19.05 -0.196 -0.662 -18.97 -0.158
8 -0.558 -16.32 -0.172 -0.558 -16.30 -0.140
9 -0.384 -11.84 -0.125 -0.383 -11.76 -0.104

Other demographics
Swedish speaker 0.145 7.64 0.054 0.143 7.53 0.046
Married 0.024 1.51 0.009 0.024 1.50 0.007
Cohabitor 0.032 1.38 0.012 0.030 1.30 0.010
Kids -0.138 -8.30 -0.049 -0.137 -8.25 -0.042

Occupation
Entrepreneur -0.231 -8.74 -0.079 -0.233 -8.81 -0.067
Farmer -0.166 -2.95 -0.058 -0.167 -2.97 -0.049
Finance professional 0.447 9.58 0.172 0.448 9.55 0.158
Unemployed -0.329 -19.99 -0.110 -0.332 -20.10 -0.093
Cohort Fixed Effects Yes Yes
Baseline probability 0.328 0.242
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,816.2
Pseudo R-squared 0.209 0.209
N 158,044 158,044
 29 (44)

Table IA.14: Alternative version of Table 2 that replaces IQ dummy variables with their average values from
each subject’s zip code and cohort.

IQ Dummy Specification Linear IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.131 6.91 0.041
Lowest -1.010 -3.45 -0.364
2 -0.779 -3.19 -0.281
3 -0.738 -3.25 -0.267
4 -0.289 -1.41 -0.104
5 -0.242 -1.19 -0.087
6 0.070 0.34 0.025
7 -0.070 -0.32 -0.025
8 0.052 0.25 0.019

Education
Basic -0.002 -1.54 -0.001 -0.003 -1.74 -0.001
Vocational -0.013 -9.96 -0.005 -0.013 -9.24 -0.004
Matricular 0.002 1.19 0.001 0.001 0.45 0.000

Ordinary income decile

No Income -0.410 -12.59 -0.133 -0.410 -12.58 -0.112
Lowest -0.562 -27.44 -0.177 -0.562 -27.40 -0.148
2 -0.636 -30.84 -0.196 -0.636 -30.85 -0.164
3 -0.638 -31.69 -0.197 -0.639 -31.67 -0.164
4 -0.713 -41.94 -0.215 -0.714 -41.83 -0.179
5 -0.728 -40.16 -0.219 -0.728 -40.22 -0.181
6 -0.638 -34.78 -0.197 -0.638 -34.74 -0.164
7 -0.522 -31.08 -0.167 -0.522 -31.08 -0.140
8 -0.392 -23.31 -0.130 -0.392 -23.29 -0.110
9 -0.203 -12.66 -0.070 -0.202 -12.63 -0.060
Income Log-Growth Rate 0.038 5.06 0.014 0.038 5.07 0.012

Wealth dummies by wealth type

Housing 0.156 14.16 0.057 0.156 14.07 0.050
Forest -0.082 -1.80 -0.029 -0.083 -1.81 -0.025
Private equity -0.172 -7.59 -0.060 -0.172 -7.58 -0.051
Foreign assets excluding equity 0.337 1.45 0.129 0.334 1.44 0.117

Net Worth decile

No Net Worth -1.658 -49.37 -0.593 -1.658 -49.34 -0.577
Lowest -0.225 -5.66 -0.077 -0.224 -5.63 -0.066
2 -0.415 -11.05 -0.134 -0.414 -11.04 -0.113
3 -0.595 -17.09 -0.181 -0.594 -17.09 -0.149
4 -0.704 -19.59 -0.205 -0.704 -19.59 -0.168
5 -0.742 -22.12 -0.213 -0.742 -22.12 -0.174
6 -0.718 -20.68 -0.208 -0.717 -20.64 -0.170
7 -0.683 -19.17 -0.201 -0.683 -19.20 -0.165
8 -0.581 -17.06 -0.177 -0.581 -17.05 -0.147
9 -0.397 -12.19 -0.129 -0.397 -12.20 -0.109

Other demographics
Swedish speaker 0.159 8.63 0.059 0.153 8.20 0.051
Married 0.053 3.31 0.019 0.053 3.30 0.017
Cohabitor 0.016 0.66 0.006 0.015 0.64 0.005
Kids -0.153 -9.11 -0.054 -0.154 -9.18 -0.048

Occupation
Entrepreneur -0.254 -9.77 -0.086 -0.255 -9.77 -0.074
Farmer -0.194 -3.40 -0.067 -0.196 -3.44 -0.058
Finance professional 0.474 10.08 0.183 0.474 10.08 0.170
Unemployed -0.399 -24.80 -0.132 -0.399 -24.79 -0.112
Cohort Fixed Effects Yes Yes
Baseline probability 0.327 0.249
2
Wald-χ (IQ1 = … = IQ8 = 0) 80.1
Pseudo R-squared 0.201 0.201
N 158,044 158,044
 30 (44)

Table IA.15: Alternative versions of Table 2 using different definitions of stock market participation. An
individual is defined as a stock market participant in Panel A only if he holds mutual funds (i.e., direct stock
ownership does not count). An individual is a stock market participant in Panel B if he owns mutual funds or at
least two different individual stocks.

Panel A: Mutual funds only

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.066 24.06 0.008
Lowest -0.545 -13.95 -0.058
2 -0.436 -14.05 -0.050
3 -0.421 -13.72 -0.049
4 -0.269 -12.10 -0.035
5 -0.212 -10.24 -0.029
6 -0.126 -6.37 -0.018
7 -0.074 -3.53 -0.011
8 -0.032 -1.50 -0.005

Education
Basic -0.002 -2.37 0.000 -0.003 -2.42 0.000
Vocational -0.006 -7.02 -0.001 -0.006 -6.98 -0.001
Matricular 0.001 0.47 0.000 0.000 0.34 0.000

Ordinary income decile

No Income -0.340 -7.45 -0.042 -0.339 -7.44 -0.031
Lowest -0.559 -20.26 -0.064 -0.559 -20.29 -0.046
2 -0.551 -19.82 -0.063 -0.551 -19.78 -0.045
3 -0.513 -18.06 -0.060 -0.514 -18.12 -0.043
4 -0.517 -21.22 -0.061 -0.519 -21.33 -0.044
5 -0.473 -19.68 -0.057 -0.475 -19.73 -0.041
6 -0.400 -17.20 -0.050 -0.401 -17.20 -0.036
7 -0.313 -13.63 -0.041 -0.312 -13.68 -0.030
8 -0.239 -10.57 -0.033 -0.237 -10.54 -0.024
9 -0.137 -6.65 -0.020 -0.135 -6.53 -0.014
Income Log-Growth Rate 0.026 2.49 0.004 0.026 2.50 0.003

Wealth dummies by wealth type

Housing -0.045 -2.93 -0.007 -0.044 -2.92 -0.005
Forest -0.121 -1.74 -0.017 -0.119 -1.72 -0.013
Private equity -0.211 -8.01 -0.029 -0.212 -8.05 -0.021
Foreign assets excluding equity -0.120 -0.46 -0.017 -0.117 -0.46 -0.012

Net Worth decile

No Net Worth -1.305 -44.06 -0.305 -1.303 -43.93 -0.249
Lowest 0.375 11.02 0.074 0.378 11.06 0.058
2 -0.074 -2.33 -0.011 -0.072 -2.26 -0.008
3 -0.168 -5.25 -0.024 -0.167 -5.19 -0.017
4 -0.326 -9.26 -0.041 -0.324 -9.22 -0.030
5 -0.391 -11.07 -0.047 -0.389 -10.98 -0.034
6 -0.436 -11.97 -0.051 -0.435 -11.88 -0.036
7 -0.482 -13.70 -0.055 -0.480 -13.66 -0.039
8 -0.371 -9.82 -0.045 -0.370 -9.80 -0.033
9 -0.254 -7.67 -0.034 -0.253 -7.61 -0.024

Other demographics
Swedish speaker 0.309 17.99 0.058 0.306 17.88 0.044
Married 0.035 1.83 0.006 0.035 1.83 0.004
Cohabitor 0.051 1.55 0.008 0.050 1.51 0.006
Kids -0.213 -9.03 -0.032 -0.212 -9.01 -0.023

Occupation
Entrepreneur -1.557 -19.00 -0.091 -1.559 -19.01 -0.063
Farmer -0.500 -6.08 -0.055 -0.503 -6.11 -0.039
Finance professional 0.395 8.24 0.079 0.396 8.22 0.062
Unemployed -0.208 -9.19 -0.029 -0.210 -9.31 -0.021
Cohort Fixed Effects Yes Yes
Baseline probability 0.086 0.058
2
Wald-χ (IQ1 = … = IQ8 = 0) 607.9
Pseudo R-squared 0.205 0.204
N 158,044 158,044
 31 (44)

Panel B: Mutual funds or two different individual stocks

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.092 34.29 0.020
Lowest -0.733 -21.37 -0.141
2 -0.604 -24.60 -0.125
3 -0.535 -21.35 -0.115
4 -0.389 -19.96 -0.090
5 -0.278 -15.05 -0.068
6 -0.161 -8.87 -0.042
7 -0.092 -4.95 -0.025
8 -0.035 -1.90 -0.010

Education
Basic -0.008 -7.06 -0.002 -0.008 -7.09 -0.002
Vocational -0.014 -14.00 -0.004 -0.014 -13.79 -0.003
Matricular -0.001 -0.62 0.000 -0.001 -0.71 0.000

Ordinary income decile

No Income -0.335 -9.58 -0.081 -0.335 -9.59 -0.059
Lowest -0.539 -23.55 -0.122 -0.540 -23.58 -0.089
2 -0.597 -25.44 -0.132 -0.597 -25.37 -0.096
3 -0.601 -27.05 -0.133 -0.602 -27.18 -0.096
4 -0.633 -31.91 -0.138 -0.635 -32.05 -0.100
5 -0.633 -32.84 -0.138 -0.636 -33.02 -0.100
6 -0.571 -28.51 -0.128 -0.573 -28.51 -0.093
7 -0.470 -23.78 -0.110 -0.469 -23.79 -0.080
8 -0.346 -17.96 -0.085 -0.343 -17.96 -0.062
9 -0.189 -10.30 -0.049 -0.186 -10.12 -0.037
Income Log-Growth Rate 0.035 4.07 0.010 0.035 4.11 0.008

Wealth dummies by wealth type

Housing 0.052 4.38 0.015 0.052 4.43 0.011
Forest -0.052 -1.04 -0.014 -0.052 -1.04 -0.011
Private equity -0.153 -6.46 -0.040 -0.153 -6.49 -0.030
Foreign assets excluding equity 0.392 1.53 0.126 0.394 1.56 0.103

Net Worth decile

No Net Worth -1.754 -54.16 -0.582 -1.752 -54.10 -0.519
Lowest -0.287 -7.05 -0.071 -0.285 -6.99 -0.052
2 -0.596 -16.42 -0.126 -0.594 -16.35 -0.090
3 -0.583 -16.94 -0.124 -0.582 -16.90 -0.089
4 -0.708 -20.45 -0.141 -0.708 -20.44 -0.100
5 -0.778 -22.28 -0.150 -0.776 -22.17 -0.106
6 -0.786 -23.75 -0.151 -0.785 -23.64 -0.106
7 -0.772 -22.14 -0.149 -0.771 -22.15 -0.105
8 -0.643 -20.24 -0.133 -0.643 -20.28 -0.095
9 -0.443 -14.15 -0.101 -0.442 -14.09 -0.074

Other demographics
Swedish speaker 0.228 13.90 0.069 0.225 13.76 0.053
Married 0.014 0.80 0.004 0.014 0.81 0.003
Cohabitor 0.059 2.14 0.017 0.057 2.05 0.012
Kids -0.196 -9.56 -0.053 -0.195 -9.52 -0.040

Occupation
Entrepreneur -0.385 -11.67 -0.090 -0.388 -11.72 -0.067
Farmer -0.257 -3.99 -0.064 -0.258 -4.02 -0.048
Finance professional 0.547 12.10 0.183 0.549 12.10 0.152
Unemployed -0.283 -14.00 -0.071 -0.286 -14.16 -0.053
Cohort Fixed Effects Yes Yes
Baseline probability 0.198 0.132
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,399.3
Pseudo R-squared 0.234 0.234
N 158,044 158,044
 32 (44)

Table IA.16: Alternative version of Table 2 that excludes individuals who received employer stock or options as
compensation.

IQ Dummy Specification Linear IQ Specification

Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
IQ stanine 0.088 39.29 0.026
Lowest -0.686 -23.08 -0.190
2 -0.558 -24.85 -0.163
3 -0.460 -19.46 -0.140
4 -0.359 -19.46 -0.113
5 -0.251 -13.89 -0.082
6 -0.143 -7.85 -0.048
7 -0.070 -3.82 -0.024
8 -0.017 -0.90 -0.006

Education
Basic -0.007 -5.61 -0.002 -0.007 -5.67 -0.002
Vocational -0.015 -13.66 -0.005 -0.016 -13.55 -0.005
Matricular 0.000 -0.12 0.000 0.000 -0.24 0.000

Ordinary income decile

No Income -0.324 -9.25 -0.104 -0.325 -9.26 -0.086
Lowest -0.431 -20.89 -0.136 -0.432 -20.88 -0.112
2 -0.495 -23.93 -0.154 -0.495 -23.93 -0.126
3 -0.489 -23.31 -0.152 -0.490 -23.36 -0.125
4 -0.532 -29.03 -0.164 -0.534 -28.97 -0.134
5 -0.536 -28.73 -0.165 -0.537 -28.82 -0.134
6 -0.461 -25.12 -0.145 -0.461 -25.16 -0.119
7 -0.375 -20.38 -0.121 -0.374 -20.31 -0.099
8 -0.289 -15.27 -0.095 -0.286 -15.22 -0.078
9 -0.155 -8.83 -0.053 -0.152 -8.66 -0.044
Income Log-Growth Rate 0.029 3.73 0.010 0.028 3.70 0.009

Wealth dummies by wealth type

Housing 0.143 12.62 0.051 0.143 12.71 0.044
Forest -0.103 -2.20 -0.035 -0.103 -2.20 -0.030
Private equity -0.179 -7.31 -0.060 -0.179 -7.34 -0.050
Foreign assets excluding equity 0.414 1.72 0.157 0.415 1.74 0.142

Net Worth decile

No Net Worth -1.636 -48.50 -0.585 -1.635 -48.39 -0.563
Lowest -0.192 -4.91 -0.064 -0.190 -4.85 -0.053
2 -0.381 -10.45 -0.120 -0.381 -10.41 -0.098
3 -0.579 -16.42 -0.170 -0.579 -16.41 -0.137
4 -0.672 -18.57 -0.190 -0.671 -18.56 -0.151
5 -0.731 -21.75 -0.202 -0.729 -21.70 -0.160
6 -0.706 -20.16 -0.197 -0.706 -20.06 -0.156
7 -0.670 -18.45 -0.190 -0.671 -18.43 -0.151
8 -0.561 -16.09 -0.166 -0.561 -16.11 -0.133
9 -0.386 -11.78 -0.121 -0.386 -11.75 -0.099

Other demographics
Swedish speaker 0.164 8.44 0.059 0.162 8.36 0.051
Married 0.029 1.78 0.010 0.029 1.78 0.009
Cohabitor 0.034 1.37 0.012 0.032 1.30 0.010
Kids -0.130 -7.57 -0.045 -0.129 -7.54 -0.038

Occupation
Entrepreneur -0.208 -8.00 -0.069 -0.210 -8.06 -0.058
Farmer -0.163 -2.83 -0.055 -0.164 -2.85 -0.046
Finance professional 0.468 9.30 0.178 0.468 9.27 0.162
Unemployed -0.324 -20.16 -0.105 -0.326 -20.26 -0.088
Cohort Fixed Effects Yes Yes
Baseline probability 0.308 0.226
2
Wald-χ (IQ1 = … = IQ8 = 0) 1,710.0
Pseudo R-squared 0.202 0.202
N 149,408 149,408
 33 (44)

Table IA.17: Alternative versions of Table 2 using different samples. Panel A uses a sample of sisters of the
study’s male subjects. Panel B uses a sample of brothers of the study’s male subjects. In both panels, brothers’
IQ scores replace own IQ scores.

Panel A: Sisters of Male Subjects

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z -values Effects
Brother's IQ stanine 0.070 4.75 0.015
Lowest -0.780 -3.31 -0.147
2 -0.337 -2.01 -0.080
3 -0.551 -4.00 -0.117
4 -0.341 -2.62 -0.081
5 -0.315 -2.61 -0.076
6 -0.185 -1.52 -0.047
7 -0.092 -0.72 -0.025
8 -0.187 -1.47 -0.048

Education
Basic -0.019 -1.90 -0.005 -0.019 -1.87 -0.004
Vocational -0.032 -3.24 -0.009 -0.031 -3.22 -0.007
Matricular -0.015 -1.41 -0.004 -0.015 -1.38 -0.003

Ordinary income decile

No Income -0.082 -0.43 -0.022 -0.091 -0.47 -0.019
Lowest -0.048 -0.24 -0.013 -0.061 -0.31 -0.013
2 -0.119 -0.70 -0.031 -0.111 -0.66 -0.023
3 0.019 0.12 0.005 0.024 0.15 0.005
4 -0.015 -0.11 -0.004 -0.009 -0.06 -0.002
5 -0.153 -1.13 -0.040 -0.147 -1.08 -0.030
6 -0.098 -0.81 -0.027 -0.093 -0.75 -0.019
7 -0.070 -0.58 -0.019 -0.072 -0.60 -0.015
8 -0.171 -1.49 -0.045 -0.169 -1.45 -0.034
9 -0.103 -0.83 -0.028 -0.102 -0.83 -0.021
Income Log-Growth Rate 0.023 0.52 0.007 0.021 0.48 0.005

Wealth dummies by wealth type

Housing -0.540 -3.49 -0.121 -0.531 -3.42 -0.088
Forest
Private equity -0.334 -1.12 -0.080 -0.323 -1.09 -0.058
Foreign assets excluding equity

Net Worth decile

No Net Worth -2.490 -14.09 -0.787 -2.486 -14.15 -0.775
Lowest 0.348 1.00 0.110 0.359 1.03 0.093
2
3 0.084 0.26 0.024 0.075 0.24 0.017
4 -0.195 -0.70 -0.050 -0.201 -0.73 -0.039
5 -0.402 -1.58 -0.093 -0.413 -1.64 -0.070
6 -0.161 -0.63 -0.042 -0.166 -0.65 -0.033
7 -0.246 -1.01 -0.062 -0.257 -1.05 -0.048
8 -0.483 -2.47 -0.108 -0.493 -2.52 -0.080
9 -0.652 -3.27 -0.134 -0.658 -3.30 -0.097

Other demographics
Swedish speaker 0.062 0.67 0.018 0.060 0.64 0.013
Married -0.242 -1.17 -0.061 -0.237 -1.13 -0.045
Cohabitor 0.018 0.05 0.005 0.002 0.01 0.000
Kids -0.028 -0.17 -0.008 -0.023 -0.13 -0.005

Occupation
Entrepreneur
Farmer
Finance professional
Unemployed -0.232 -2.10 -0.059 -0.234 -2.11 -0.045
Cohort Fixed Effects Yes Yes

Baseline probability 0.199 0.134

2
Wald-χ (IQ1 = … = IQ8 = 0) 32.2
Pseudo R-squared 0.355 0.354
N 4,358 4,358
 34 (44)

Panel B: Brothers of Male Subjects

IQ Dummy Specification Linear IQ Specification
Marginal Marginal
Independent variables Coefficients z -values Effects Coefficients z-values Effects
Brother's IQ stanine 0.081 4.92 0.020
Lowest -0.265 -1.25 -0.063
2 -0.565 -3.11 -0.115
3 -0.257 -1.63 -0.061
4 -0.299 -2.41 -0.070
5 -0.108 -0.90 -0.028
6 0.007 0.06 0.002
7 0.201 1.54 0.059
8 0.067 0.50 0.019

Education
Basic -0.010 -1.29 -0.003 -0.010 -1.21 -0.002
Vocational -0.027 -3.74 -0.007 -0.027 -3.76 -0.007
Matricular -0.003 -0.35 -0.001 -0.003 -0.33 -0.001

Ordinary income decile

No Income 0.344 1.65 0.105 0.321 1.52 0.090
Lowest 0.433 1.66 0.137 0.440 1.66 0.130
2 -0.025 -0.13 -0.007 -0.054 -0.29 -0.013
3 -0.031 -0.19 -0.008 -0.040 -0.25 -0.010
4 -0.033 -0.21 -0.009 -0.028 -0.18 -0.007
5 -0.050 -0.40 -0.013 -0.052 -0.41 -0.012
6 0.035 0.27 0.009 0.039 0.30 0.010
7 -0.076 -0.71 -0.020 -0.074 -0.70 -0.018
8 -0.108 -0.94 -0.028 -0.096 -0.84 -0.023
9 -0.137 -1.28 -0.035 -0.145 -1.36 -0.034
Income Log-Growth Rate 0.070 1.51 0.019 0.066 1.40 0.016

Wealth dummies by wealth type

Housing -0.352 -2.52 -0.083 -0.360 -2.59 -0.076
Forest
Private equity -0.808 -2.79 -0.145 -0.814 -2.85 -0.128
Foreign assets excluding equity
Net Worth decile
No Net Worth -2.293 -11.66 -0.744 -2.284 -11.66 -0.734
Lowest 0.542 1.16 0.178 0.506 1.10 0.153
2 1.038 2.02 0.372 0.987 1.92 0.337
3 0.037 0.13 0.010 0.074 0.26 0.019
4 0.275 0.76 0.083 0.294 0.81 0.082
5 0.156 0.55 0.045 0.161 0.58 0.043
6 -0.220 -0.78 -0.054 -0.190 -0.68 -0.043
7 -0.298 -1.17 -0.070 -0.288 -1.14 -0.061
8 -0.346 -1.44 -0.080 -0.319 -1.35 -0.067
9 -0.559 -2.39 -0.116 -0.553 -2.36 -0.102

Other demographics
Swedish speaker 0.342 3.09 0.103 0.341 3.10 0.095
Married -0.014 -0.06 -0.004 -0.003 -0.01 -0.001
Cohabitor 0.295 0.61 0.090 0.302 0.62 0.085
Kids -0.391 -0.91 -0.088 -0.394 -0.93 -0.079

Occupation
Entrepreneur
Farmer
Finance professional 1.122 1.98 0.406 1.121 1.97 0.392
Unemployed -0.650 -5.05 -0.133 -0.635 -4.88 -0.117

Cohort Fixed Effects Yes Yes

Baseline probability 0.189 0.162

2
Wald-χ (IQ1 = … = IQ8 = 0) 38.4
Pseudo R-squared 0.385 0.382
N 3,992 3,992
 35 (44)

Table IA.18: Alternative version of Table 7 using the linear-IQ specification

Panel A: Sharpe Ratios 
Sharpe Ratio
Coefficients t -values
Stock Risk Premium / Fund Risk Premium Stock Risk Premium / Fund Risk Premium
Independent variables 80% 100% 120% 80% 100% 120%
IQ stanine 0.001 0.001 0.002 5.68 7.24 8.56
Lowest
2
3
4
5
6
7
8

Education
Basic 0.000 0.000 0.000 -2.02 -2.51 -2.93
Vocational 0.000 0.000 0.000 2.78 2.01 1.22
Matricular 0.000 0.000 0.000 -3.90 -4.39 -4.36

Ordinary income decile

No Income 0.004 0.008 0.012 1.71 3.23 4.60
Lowest -0.004 0.000 0.004 -2.41 0.11 2.46
2 -0.002 0.002 0.005 -0.95 0.91 2.72
3 -0.002 0.000 0.003 -1.22 0.19 1.56
4 0.000 0.001 0.002 -0.32 0.60 1.49
5 0.001 0.001 0.002 0.41 0.94 1.47
6 0.001 0.002 0.003 1.15 1.67 2.14
7 0.001 0.002 0.003 1.14 1.78 2.36
8 0.000 0.000 0.001 -0.38 0.08 0.51
9 -0.001 -0.001 -0.001 -1.20 -0.84 -0.47
Income Log-Growth Rate 0.002 0.002 0.003 3.14 3.74 4.13

Wealth dummies by wealth type

Housing -0.005 -0.004 -0.004 -6.70 -6.06 -5.15
Forest 0.005 0.006 0.007 1.56 1.90 2.16
Private equity -0.001 0.000 0.001 -0.73 0.05 0.76
Foreign assets excluding equity 0.000 0.006 0.012 0.00 0.47 0.80

Net Worth decile

No Net Worth -0.019 -0.022 -0.025 -13.18 -13.99 -14.36
Lowest 0.024 0.014 0.004 11.17 6.63 1.96
2 0.002 -0.005 -0.011 1.13 -2.41 -5.71
3 0.002 -0.003 -0.008 1.28 -1.44 -4.01
4 -0.003 -0.006 -0.010 -1.50 -3.61 -5.54
5 -0.004 -0.007 -0.010 -1.92 -3.51 -4.88
6 -0.009 -0.011 -0.014 -4.61 -5.73 -6.58
7 -0.011 -0.013 -0.015 -6.18 -6.94 -7.42
8 -0.008 -0.010 -0.012 -4.72 -5.62 -6.23
9 -0.005 -0.007 -0.008 -2.79 -3.45 -3.96

Other demographics
Swedish speaker 0.016 0.014 0.013 10.97 10.63 9.99
Married 0.002 0.001 0.001 1.24 1.11 0.96
Cohabitor 0.000 0.000 -0.001 0.02 -0.20 -0.41
Kids -0.004 -0.003 -0.002 -3.12 -2.41 -1.64

Occupation
Entrepreneur -0.024 -0.020 -0.016 -21.12 -15.52 -10.93
Farmer -0.016 -0.014 -0.012 -4.39 -3.68 -2.96
Finance professional 0.005 0.005 0.005 1.90 1.95 1.94
Unemployed 0.002 0.002 0.002 1.38 1.13 0.84

Cohort Fixed Effects Yes Yes Yes

Adjusted R-squared 0.073 0.064 0.054

N 44,592 44,592 44,592  
 36 (44)

Panel B: Portfolio Variance 
t -values
Total Total
portfolio Stock portfolio variance portfolio Stock portfolio variance
Independent variables volatility log(σ2 ) σ
2
volatility log(σ2 ) σ
2

IQ stanine -0.005 -0.035 -0.008 -7.79 -13.54 -9.90

Lowest
2
3
4
5
6
7
8

Education
Basic 0.001 0.003 0.001 2.35 3.22 2.19
Vocational 0.000 0.001 0.001 -1.43 1.42 1.56
Matricular 0.001 0.004 0.001 4.24 3.05 2.30

Ordinary income decile

No Income -0.042 -0.206 -0.062 -4.55 -5.62 -4.81
Lowest -0.019 -0.139 -0.056 -2.83 -4.98 -5.67
2 -0.021 -0.120 -0.050 -3.02 -4.71 -5.04
3 -0.013 -0.064 -0.031 -2.04 -2.72 -3.80
4 -0.013 -0.030 -0.025 -2.52 -1.41 -3.43
5 -0.012 0.005 -0.016 -2.58 0.25 -2.61
6 -0.014 -0.007 -0.017 -3.09 -0.44 -3.04
7 -0.016 -0.019 -0.021 -3.81 -1.15 -3.60
8 -0.005 -0.001 -0.010 -1.25 -0.06 -1.78
9 0.000 0.017 -0.002 -0.02 1.15 -0.34
Income Log-Growth Rate -0.008 -0.042 -0.009 -3.60 -4.63 -3.07

Wealth dummies by wealth type

Housing 0.013 0.038 0.009 5.03 4.12 2.77
Forest -0.015 -0.071 -0.012 -1.30 -1.64 -0.88
Private equity 0.001 -0.047 -0.009 0.24 -2.26 -1.38
Foreign assets excluding equity -0.032 -0.169 -0.060 -0.95 -1.09 -1.92

Net Worth decile

No Net Worth 0.083 0.433 0.112 16.32 20.28 18.46
Lowest -0.028 0.320 0.079 -4.04 9.42 7.59
2 0.025 0.369 0.086 3.76 13.96 10.62
3 0.007 0.216 0.036 1.18 8.70 4.80
4 0.022 0.212 0.046 3.75 8.32 6.15
5 0.023 0.208 0.042 3.77 7.79 5.57
6 0.035 0.223 0.047 4.95 8.12 5.30
7 0.041 0.244 0.049 6.38 8.98 6.24
8 0.029 0.176 0.031 4.92 6.92 4.53
9 0.018 0.110 0.020 2.88 4.23 2.70

Other demographics
Swedish speaker -0.051 -0.117 -0.037 -11.74 -6.69 -6.78
Married -0.006 -0.021 -0.008 -1.27 -1.25 -1.40
Cohabitor 0.003 0.011 0.003 0.41 0.42 0.40
Kids 0.009 0.018 0.005 2.03 1.01 0.83

Occupation
Entrepreneur 0.063 0.099 0.024 10.77 4.87 3.35
Farmer 0.037 0.098 0.018 2.73 1.77 1.14
Finance professional -0.018 -0.080 -0.019 -1.97 -1.94 -1.58
Unemployed 0.002 0.041 0.019 0.26 1.57 2.15

Cohort Fixed Effects Yes Yes Yes

Adjusted R-squared 0.052 0.057 0.035

N 44,592 36,359 36,359  
 37 (44)

Panel C: Portfolio Diversification 
log(σe2 ) Number of Stocks Held Decision to Own Mutual Funds
Marginal Marginal
Independent variables Coefficients z -values Coefficients z -values Effects Coefficients z -values Effects
IQ stanine -0.038 -14.25 0.043 13.98 0.089 0.020 5.42 0.007
Lowest
2
3
4
5
6
7
8

Education
Basic 0.004 3.32 -0.004 -3.22 -0.009 0.001 0.57 0.000
Vocational 0.002 1.83 -0.009 -6.78 -0.018 0.003 2.57 0.001
Matricular 0.004 3.01 -0.001 -0.44 -0.002 -0.001 -0.71 0.000

Ordinary income decile

No Income -0.192 -5.09 0.002 0.05 0.004 -0.227 -3.93 -0.077
Lowest -0.122 -4.26 -0.063 -2.47 -0.126 -0.430 -11.61 -0.139
2 -0.101 -3.75 -0.145 -6.07 -0.283 -0.358 -9.54 -0.118
3 -0.046 -1.89 -0.182 -6.91 -0.350 -0.291 -8.20 -0.097
4 -0.007 -0.30 -0.258 -11.43 -0.479 -0.264 -8.10 -0.089
5 0.026 1.38 -0.273 -10.37 -0.504 -0.181 -5.69 -0.062
6 0.014 0.80 -0.284 -11.75 -0.524 -0.140 -4.69 -0.049
7 -0.002 -0.09 -0.217 -9.23 -0.413 -0.127 -4.48 -0.044
8 0.014 0.88 -0.138 -6.85 -0.271 -0.109 -4.25 -0.038
9 0.029 1.98 -0.107 -6.65 -0.213 -0.091 -3.94 -0.032
Income Log-Growth Rate -0.042 -4.59 0.015 1.29 0.031 0.012 0.88 0.004

Wealth dummies by wealth type

Housing 0.048 5.06 -0.008 -0.57 -0.016 -0.106 -6.27 -0.038
Forest -0.059 -1.33 -0.028 -0.55 -0.056 -0.067 -0.84 -0.024
Private equity -0.044 -2.10 0.091 2.86 0.196 -0.085 -2.59 -0.030
Foreign assets excluding equity -0.161 -1.07 0.146 0.97 0.325 -0.165 -0.58 -0.057

Net Worth decile

No Net Worth 0.510 22.89 -1.090 -49.45 -2.289 -0.636 -21.50 -0.223
Lowest 0.385 11.01 -1.558 -44.77 -1.796 0.489 11.93 0.187
2 0.428 15.66 -1.236 -41.89 -1.573 0.004 0.12 0.002
3 0.257 10.19 -0.987 -35.10 -1.365 0.013 0.36 0.005
4 0.251 9.28 -0.824 -25.74 -1.209 -0.110 -2.77 -0.038
5 0.251 9.15 -0.793 -25.43 -1.176 -0.172 -4.47 -0.059
6 0.265 9.45 -0.682 -25.88 -1.057 -0.245 -6.29 -0.083
7 0.289 10.37 -0.679 -21.63 -1.055 -0.321 -8.38 -0.106
8 0.209 7.92 -0.546 -19.16 -0.897 -0.237 -5.65 -0.080
9 0.129 4.77 -0.418 -15.64 -0.725 -0.176 -5.06 -0.061

Other demographics
Swedish speaker -0.124 -7.03 -0.033 -1.50 -0.068 0.318 12.10 0.119
Married -0.021 -1.27 -0.054 -2.94 -0.110 0.030 1.24 0.011
Cohabitor 0.009 0.35 0.013 0.45 0.027 0.044 1.11 0.016
Kids 0.027 1.52 -0.064 -3.43 -0.132 -0.173 -6.32 -0.061

Occupation
Entrepreneur 0.121 5.91 0.080 2.94 0.171 -1.612 -19.09 -0.315
Farmer 0.134 2.40 -0.009 -0.14 -0.019 -0.592 -6.03 -0.177
Finance professional -0.098 -2.37 0.235 6.74 0.547 0.249 5.44 0.093
Unemployed 0.044 1.66 -0.016 -0.47 -0.032 0.007 0.20 0.003

Cohort Fixed Effects Yes Yes Yes

Baseline No. of Stocks / Prob. 2.071 0.321

Pseudo/Adjusted R-squared 0.069 0.081
N 36,359 44,592 44,592  
 38 (44)

Panel D: Systematic Risk 
Coefficients t -values
Independent variables log(σM2 ) Beta Size Rank B/M Rank log(σM2 ) Beta Size Rank B/M Rank
IQ stanine -0.026 -0.010 -0.004 0.005 -8.04 -8.19 -6.93 8.26
Lowest
2
3
4
5
6
7
8

Education
Basic 0.003 0.001 0.000 -0.001 2.49 2.26 2.44 -1.64
Vocational -0.002 0.000 0.000 0.001 -1.46 -0.96 -1.71 3.08
Matricular 0.003 0.001 0.000 -0.001 2.55 1.89 0.43 -3.94

Ordinary income decile

No Income -0.325 -0.119 0.011 0.063 -6.57 -6.74 1.71 6.51
Lowest -0.258 -0.099 0.024 0.054 -7.27 -8.01 5.93 7.84
2 -0.216 -0.088 0.025 0.052 -7.42 -8.50 5.76 7.75
3 -0.149 -0.064 0.024 0.043 -5.05 -5.99 5.42 6.82
4 -0.153 -0.069 0.020 0.035 -5.15 -6.39 4.70 5.88
5 -0.081 -0.041 0.025 0.021 -3.30 -4.61 6.26 4.00
6 -0.097 -0.048 0.020 0.024 -4.25 -5.72 4.65 5.08
7 -0.094 -0.043 0.020 0.022 -4.50 -5.65 6.17 4.90
8 -0.068 -0.030 0.012 0.013 -3.38 -4.07 3.69 3.08
9 -0.041 -0.015 0.007 0.006 -2.03 -1.98 2.03 1.72
Income Log-Growth Rate -0.055 -0.017 -0.003 0.008 -4.23 -4.04 -1.69 3.01

Wealth dummies by wealth type

Housing -0.005 -0.001 0.001 -0.001 -0.41 -0.27 0.30 -0.41
Forest -0.134 -0.037 -0.009 0.038 -2.44 -1.97 -1.15 3.53
Private equity -0.082 -0.020 -0.017 0.016 -2.70 -2.19 -3.36 2.85
Foreign assets excluding equity -0.148 -0.043 -0.019 0.030 -0.72 -0.71 -0.62 0.81

Net Worth decile

No Net Worth 0.107 0.068 0.000 0.016 4.14 8.17 -0.06 3.50
Lowest 0.068 0.047 -0.010 0.035 1.57 3.27 -1.77 4.15
2 0.168 0.079 0.012 -0.017 5.08 6.97 2.70 -2.51
3 0.107 0.049 0.012 0.006 3.28 4.41 2.65 0.99
4 0.104 0.054 0.011 0.004 3.67 5.66 2.22 0.55
5 0.055 0.042 0.007 0.008 1.54 3.55 1.50 1.25
6 0.086 0.053 0.008 0.002 2.49 4.58 1.81 0.34
7 0.085 0.050 0.011 0.009 2.50 4.39 2.64 1.33
8 0.091 0.044 0.014 0.002 2.88 4.13 3.13 0.43
9 0.061 0.030 0.004 0.005 1.96 2.85 1.10 0.87

Other demographics
Swedish speaker -0.097 -0.045 0.006 0.016 -3.85 -5.56 1.74 2.86
Married -0.023 -0.013 0.004 0.005 -0.98 -1.54 1.11 0.95
Cohabitor 0.012 0.003 -0.006 -0.002 0.34 0.26 -1.19 -0.28
Kids -0.034 -0.009 0.002 0.008 -1.43 -1.03 0.52 1.62

Occupation
Entrepreneur -0.040 -0.007 0.002 0.006 -1.28 -0.65 0.44 0.96
Farmer -0.212 -0.051 -0.057 0.049 -2.36 -1.69 -4.32 2.94
Finance professional -0.016 0.005 -0.021 -0.003 -0.29 0.23 -3.37 -0.33
Unemployed 0.038 0.021 -0.002 -0.002 1.07 1.77 -0.37 -0.26

Cohort Fixed Effects Yes Yes Yes Yes

Adjusted R-squared 0.017 0.019 0.024 0.036

N 36,359 36,359 36,359 36,359  
 39 (44)

Table IA.19: Alternative version of Table 7 that restricts the sample to the 10% most affluent individuals based
on income.

Panel A: Sharpe Ratios 
Sharpe Ratio
Coefficients t -values
Stock Risk Premium / Fund Risk Premium Stock Risk Premium / Fund Risk Premium
Independent variables 80% 100% 120% 80% 100% 120%
IQ stanine 0.002 0.002 0.002 4.21 4.31 4.00
Lowest
2
3
4
5
6
7
8

Education
Basic 0.000 0.000 0.000 -1.17 -1.51 -0.81
Vocational 0.000 0.000 0.000 -0.92 -0.99 -0.83
Matricular 0.000 0.000 0.000 -1.87 -1.89 -1.81

Ordinary income decile

No Income
Lowest
2
3
4
5
6
7
8
9
Income Log-Growth Rate 0.002 0.001 0.003 0.66 0.18 1.14

Wealth dummies by wealth type

Housing -0.005 -0.004 -0.007 -3.03 -2.24 -3.75
Forest 0.001 0.003 -0.001 0.22 0.50 -0.09
Private equity 0.003 0.005 0.002 1.05 1.33 0.69
Foreign assets excluding equity -0.013 -0.013 -0.012 -0.84 -0.79 -0.88

Net Worth decile

No Net Worth -0.023 -0.025 -0.020 -10.11 -10.34 -9.54
Lowest -0.009 -0.013 -0.004 -1.21 -1.80 -0.61
2 -0.019 -0.022 -0.017 -4.34 -4.68 -3.84
3 -0.013 -0.015 -0.011 -2.68 -3.22 -2.10
4 -0.013 -0.015 -0.011 -3.23 -3.57 -2.75
5 -0.014 -0.016 -0.011 -3.63 -4.02 -3.11
6 -0.015 -0.017 -0.014 -4.93 -5.19 -4.44
7 -0.016 -0.017 -0.015 -4.78 -4.76 -4.66
8 -0.012 -0.014 -0.011 -3.81 -3.87 -3.63
9 -0.005 -0.007 -0.004 -1.76 -1.94 -1.50

Other demographics
Swedish speaker 0.014 0.014 0.014 5.80 5.82 5.51
Married 0.003 0.002 0.003 1.15 0.96 1.32
Cohabitor 0.002 0.001 0.002 0.41 0.37 0.44
Kids -0.003 -0.002 -0.004 -1.35 -0.87 -1.83

Occupation
Entrepreneur -0.014 -0.010 -0.019 -5.43 -3.10 -8.76
Farmer -0.006 -0.005 -0.006 -0.79 -0.62 -0.95
Finance professional 0.009 0.010 0.009 2.52 2.52 2.44
Unemployed 0.024 0.024 0.024 1.35 1.34 1.32

Cohort Fixed Effects Yes Yes Yes

Adjusted R-squared 0.037 0.039 0.035

N 44,592 44,592 44,592
 40 (44)

Panel B: Portfolio Variance 
t -values
Total Total
portfolio Stock portfolio variance portfolio Stock portfolio variance
Independent variables volatility log(σ2 ) σ
2
volatility log(σ2 ) σ
2

IQ stanine -0.008 -0.037 -0.009 -4.15 -5.51 -4.19

Lowest
2
3
4
5
6
7
8

Education
Basic 0.000 0.004 0.000 0.68 1.75 0.38
Vocational 0.001 0.002 0.001 1.28 0.91 1.45
Matricular 0.002 0.005 0.003 2.15 1.48 1.60

Ordinary income decile

No Income
Lowest
2
3
4
5
6
7
8
9
Income Log-Growth Rate -0.005 -0.023 -0.006 -0.48 -0.59 -0.51

Wealth dummies by wealth type

Housing 0.011 0.012 -0.002 1.78 0.48 -0.24
Forest 0.002 -0.031 -0.006 0.07 -0.36 -0.24
Private equity -0.010 -0.064 -0.010 -0.81 -1.29 -0.60
Foreign assets excluding equity 0.012 0.155 -0.008 0.29 0.81 -0.22

Net Worth decile

No Net Worth 0.082 0.439 0.108 11.74 14.55 12.66
Lowest 0.035 0.342 0.076 1.41 3.75 2.74
2 0.050 0.389 0.069 3.16 6.35 3.53
3 0.034 0.292 0.052 2.09 5.12 2.68
4 0.045 0.268 0.063 2.73 4.47 2.90
5 0.035 0.238 0.039 2.88 4.57 2.56
6 0.040 0.258 0.045 3.21 5.27 2.68
7 0.048 0.253 0.052 4.12 5.58 3.47
8 0.035 0.217 0.039 3.12 4.84 2.97
9 0.014 0.090 0.016 1.40 2.05 1.31

Other demographics
Swedish speaker -0.054 -0.167 -0.053 -6.71 -5.18 -5.89
Married -0.002 -0.024 -0.001 -0.29 -0.71 -0.12
Cohabitor -0.004 -0.020 -0.008 -0.31 -0.36 -0.43
Kids 0.009 0.017 0.004 1.02 0.50 0.32

Occupation
Entrepreneur 0.036 0.054 -0.002 3.24 1.26 -0.15
Farmer 0.017 0.099 0.030 0.61 0.83 0.79
Finance professional -0.029 -0.126 -0.022 -2.19 -2.22 -1.26
Unemployed -0.087 -0.247 -0.086 -1.63 -1.01 -1.56

Cohort Fixed Effects Yes Yes Yes

Adjusted R-squared 0.036 0.062 0.041

N 44,592 36,359 36,359
 41 (44)

Panel C: Portfolio Diversification 
log(σe2) Number of Stocks Held Decision to Own Mutual Funds
Marginal Marginal
Independent variables Coefficients z -values Coefficients z -values Effects Coefficients z -values Effects
IQ stanine -0.039 -5.78 0.018 2.59 0.052 0.032 3.37 0.011
Lowest
2
3
4
5
6
7
8

Education
Basic 0.004 1.61 -0.002 -0.78 -0.006 0.007 1.98 0.002
Vocational 0.002 1.05 -0.007 -3.06 -0.020 -0.003 -1.24 -0.001
Matricular 0.005 1.52 0.000 0.09 0.001 -0.001 -0.29 0.000

Ordinary income decile

No Income
Lowest
2
3
4
5
6
7
8
9
Income Log-Growth Rate -0.035 -0.88 -0.010 -0.25 -0.030 0.150 2.85 0.054

Wealth dummies by wealth type

Housing 0.018 0.70 0.020 0.70 0.056 -0.169 -4.39 -0.062
Forest -0.007 -0.08 -0.064 -0.74 -0.175 -0.302 -2.03 -0.100
Private equity -0.055 -1.10 0.023 0.40 0.067 -0.083 -1.19 -0.029
Foreign assets excluding equity 0.130 0.68 0.183 1.10 0.569 0.398 1.09 0.152

Net Worth decile

No Net Worth 0.504 15.78 -0.965 -26.10 -2.664 -0.517 -11.15 -0.181
Lowest 0.399 4.23 -1.112 -10.08 -1.935 -0.110 -0.96 -0.038
2 0.452 6.97 -0.920 -12.28 -1.745 -0.474 -4.94 -0.149
3 0.337 5.75 -0.795 -11.71 -1.593 -0.296 -2.81 -0.098
4 0.307 4.96 -0.756 -11.46 -1.544 -0.325 -4.04 -0.107
5 0.277 5.14 -0.692 -9.75 -1.458 -0.292 -3.95 -0.097
6 0.300 5.91 -0.661 -10.88 -1.416 -0.339 -4.75 -0.112
7 0.294 6.28 -0.648 -12.84 -1.402 -0.359 -4.83 -0.118
8 0.256 5.50 -0.566 -11.37 -1.275 -0.393 -5.82 -0.128
9 0.107 2.36 -0.423 -10.59 -1.017 -0.133 -2.51 -0.046

Other demographics
Swedish speaker -0.172 -5.28 0.030 0.71 0.087 0.222 4.42 0.083
Married -0.022 -0.65 -0.124 -3.99 -0.355 0.052 1.19 0.018
Cohabitor -0.016 -0.29 -0.056 -1.06 -0.156 0.047 0.59 0.017
Kids 0.027 0.76 -0.063 -1.78 -0.179 -0.185 -3.73 -0.066

Occupation
Entrepreneur 0.079 1.84 0.061 1.20 0.177 -1.785 -9.61 -0.331
Farmer 0.105 0.88 0.122 1.10 0.365 -0.271 -1.48 -0.090
Finance professional -0.140 -2.44 0.215 4.36 0.672 0.231 3.64 0.086
Unemployed -0.262 -1.08 0.051 0.15 0.148 0.294 0.91 0.111

Cohort Fixed Effects Yes Yes Yes

Baseline No. of Stocks / Prob. 2.832 0.322

Pseudo/Adjusted R-squared 0.070 0.055
N 36,359 8,344  
 42 (44)

Panel D: Systematic Risk 
Coefficients t -values
Independent variables log(σM2 ) Beta Size Rank B/M Rank log(σM2 ) Beta Size Rank B/M Rank
IQ stanine -0.026 -0.013 -0.003 0.006 -3.08 -4.01 -2.11 4.00
Lowest
2
3
4
5
6
7
8

Education
Basic 0.006 0.002 0.001 0.000 1.91 1.53 2.17 -0.41
Vocational 0.000 0.000 0.000 0.000 0.12 0.27 -0.49 0.41
Matricular 0.003 0.001 0.000 -0.001 0.73 0.65 0.31 -1.17

Ordinary income decile

No Income
Lowest
2
3
4
5
6
7
8
9
Income Log-Growth Rate 0.005 0.014 -0.003 -0.013 0.09 0.71 -0.37 -1.29

Wealth dummies by wealth type

Housing -0.008 -0.006 0.013 0.005 -0.26 -0.47 2.16 0.75
Forest -0.140 -0.040 0.009 0.024 -1.43 -1.04 0.64 1.31
Private equity -0.162 -0.051 -0.027 0.032 -2.38 -2.32 -2.68 2.50
Foreign assets excluding equity 0.289 0.082 -0.055 -0.066 1.08 0.99 -0.84 -1.47

Net Worth decile

No Net Worth 0.189 0.094 0.011 -0.003 4.71 7.23 2.07 -0.36
Lowest 0.150 0.065 0.018 0.029 1.42 1.56 1.07 1.22
2 0.185 0.071 0.042 -0.015 2.71 2.79 3.85 -1.07
3 0.163 0.069 0.028 0.014 2.29 2.60 3.27 0.96
4 0.165 0.083 0.015 0.005 2.31 2.86 1.46 0.35
5 0.079 0.045 0.017 0.007 1.13 1.81 1.81 0.50
6 0.141 0.061 0.023 -0.003 2.39 2.89 2.39 -0.27
7 0.098 0.064 0.016 0.015 1.70 3.33 2.10 1.32
8 0.114 0.054 0.025 0.009 2.26 2.96 3.51 0.86
9 0.048 0.031 0.015 0.013 0.85 1.65 2.39 1.53

Other demographics
Swedish speaker -0.166 -0.068 0.009 0.022 -3.29 -4.07 1.38 2.47
Married -0.034 -0.013 0.006 0.008 -0.82 -0.80 0.85 0.94
Cohabitor -0.020 -0.002 -0.002 0.008 -0.28 -0.09 -0.20 0.58
Kids -0.040 -0.012 0.002 0.011 -0.99 -0.82 0.28 1.15

Occupation
Entrepreneur -0.077 -0.027 0.019 0.020 -1.37 -1.33 2.63 1.67
Farmer 0.062 0.023 -0.039 -0.001 0.41 0.42 -2.02 -0.02
Finance professional -0.079 -0.014 -0.019 0.014 -1.07 -0.52 -2.29 1.07
Unemployed -0.102 -0.034 0.029 0.079 -0.30 -0.32 0.73 1.20

Cohort Fixed Effects Yes Yes Yes Yes

Adjusted R-squared 0.023 0.030 0.031 0.017

N 36,359 36,359 36,359 36,359
 43 (44)

Table IA.20: Alternative versions of Table 7 Panels C and D. The systematic- and idiosyncratic-variance
regressions are estimated using HEX-index-based one- and three-factor models.
 
Panel A: Diversifiable and Systematic Risk from (HEX) One-Factor Model
Coefficients t -values
Independent variables log(σe2) log(σm2) log(σe2 ) log(σm2 )
IQ stanine
Lowest 0.356 0.293 7.41 5.33
2 0.316 0.238 9.10 6.02
3 0.330 0.233 10.18 6.09
4 0.238 0.173 9.35 6.51
5 0.211 0.145 8.12 5.84
6 0.130 0.114 5.53 5.11
7 0.070 0.074 2.83 2.95
8 0.070 0.061 2.73 2.16

Education
Basic 0.004 0.004 3.17 2.59
Vocational 0.004 -0.002 3.16 -1.88
Matricular 0.005 0.004 2.40 2.71

Ordinary income decile

No Income -0.097 -0.402 -1.74 -7.29
Lowest -0.015 -0.297 -0.41 -7.38
2 0.009 -0.256 0.23 -7.62
3 0.067 -0.160 2.16 -4.86
4 0.108 -0.168 3.55 -4.93
5 0.146 -0.089 5.59 -3.19
6 0.120 -0.103 5.17 -3.87
7 0.101 -0.090 4.27 -3.84
8 0.093 -0.056 4.49 -2.44
9 0.102 -0.037 5.16 -1.59
Income Log-Growth Rate -0.039 -0.065 -3.32 -4.47

Wealth dummies by wealth type

Housing 0.111 0.002 8.16 0.11
Forest -0.002 -0.151 -0.04 -2.48
Private equity -0.047 -0.083 -1.53 -2.56
Foreign assets excluding equity -0.019 -0.215 -0.12 -0.88

Net Worth decile

No Net Worth 0.962 0.072 25.29 2.59
Lowest 0.763 0.031 14.66 0.67
2 0.736 0.210 16.04 5.84
3 0.482 0.128 10.70 3.57
4 0.485 0.125 10.29 3.96
5 0.499 0.071 11.04 1.80
6 0.516 0.102 11.95 2.74
7 0.537 0.100 13.03 2.74
8 0.396 0.112 9.24 3.26
9 0.238 0.068 5.36 1.97

Other demographics
Swedish speaker -0.154 -0.103 -6.89 -3.56
Married -0.032 -0.020 -1.51 -0.75
Cohabitor -0.010 0.025 -0.29 0.63
Kids 0.088 -0.045 3.75 -1.70

Occupation
Entrepreneur 0.260 -0.086 11.68 -2.26
Farmer 0.294 -0.282 3.82 -2.69
Finance professional -0.201 -0.023 -3.68 -0.39
Unemployed 0.083 0.037 2.73 0.95

Cohort Fixed Effects Yes Yes

2
Wald-χ (IQ1 = … = IQ8 = 0) 29.3 10.7
Adjusted R-squared 0.099 0.024
N 36,359 36,359
 44 (44)

Panel B: Diversifiable and Systematic Risk from (HEX) Three-Factor Model

Coefficients t -values
Independent variables log(σe2 ) log(σm2) log(σe2 ) log(σm2 )
IQ stanine
Lowest 0.360 0.292 7.56 5.22
2 0.318 0.235 9.27 5.81
3 0.333 0.233 10.34 5.98
4 0.241 0.172 9.54 6.29
5 0.213 0.143 8.31 5.70
6 0.132 0.112 5.60 4.91
7 0.072 0.072 2.94 2.79
8 0.071 0.056 2.79 2.00

Education
Basic 0.004 0.004 3.28 2.53
Vocational 0.004 -0.003 3.29 -2.06
Matricular 0.005 0.004 2.41 2.92

Ordinary income decile

No Income -0.089 -0.412 -1.58 -7.39
Lowest -0.003 -0.314 -0.07 -7.66
2 0.021 -0.267 0.54 -7.75
3 0.079 -0.174 2.56 -5.19
4 0.116 -0.177 3.87 -5.10
5 0.154 -0.087 5.99 -3.19
6 0.128 -0.102 5.58 -3.80
7 0.108 -0.105 4.56 -4.40
8 0.097 -0.060 4.75 -2.59
9 0.104 -0.036 5.29 -1.57
Income Log-Growth Rate -0.040 -0.064 -3.36 -4.23

Wealth dummies by wealth type

Housing 0.112 0.003 8.33 0.19
Forest 0.001 -0.144 0.01 -2.30
Private equity -0.046 -0.090 -1.49 -2.78
Foreign assets excluding equity -0.030 -0.206 -0.20 -0.82

Net Worth decile

No Net Worth 0.966 0.093 25.43 3.26
Lowest 0.766 0.050 14.78 1.05
2 0.738 0.223 16.14 6.07
3 0.482 0.134 10.72 3.73
4 0.485 0.129 10.36 4.00
5 0.501 0.081 11.13 2.07
6 0.517 0.105 12.05 2.75
7 0.539 0.104 13.20 2.79
8 0.396 0.115 9.26 3.30
9 0.239 0.071 5.40 2.09

Other demographics
Swedish speaker -0.150 -0.120 -6.76 -3.74
Married -0.030 -0.022 -1.44 -0.83
Cohabitor -0.011 0.034 -0.32 0.84
Kids 0.091 -0.048 3.90 -1.76

Occupation
Entrepreneur 0.261 -0.064 12.00 -1.74
Farmer 0.297 -0.334 3.86 -2.79
Finance professional -0.209 -0.025 -3.88 -0.41
Unemployed 0.084 0.030 2.77 0.74

Cohort Fixed Effects Yes Yes

2
Wald-χ (IQ1 = … = IQ8 = 0) 30.4 10.8
Adjusted R-squared 0.101 0.025
N 36,359 36,359