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Masters of the Stock Market

Kristjan Liivamägi, Tarvo Vaarmets and Tõnn Talpsepp

No 16, TUT Economic Research Series from Department of Finance and Economics, Tallinn University of Technology

Abstract: We analyze how intellectual abilities and education affect investors’ risk-adjusted returns in the stock market. To investigate such effects, we use educational performance measured by standardized exams and the type and specialty of a university degree obtained. The data used covers one complete business cycle and includes detailed transactions and performance on the national stock exchange for all Estonian individual investors along with their past educational records from a national registry. Controlling for trading style, wealth, experience and variety of educational characteristics, we provide empirical evidence that investors with higher mathematical skills combined with overall high intellectual ability, have higher probability to outperform market. We also show that investors holding higher university degrees or specialize in certain fields achieve higher risk-adjusted return in the stock market.

Date: 2014-09-12
New Economics Papers: this item is included in nep-edu and nep-fmk
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Citations: View citations in EconPapers (2)

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