Monday, December 14, 2009

The Value of Intelligence

Are you smart enough to pick the stocks you invest in? Obviously, brains are a big part of successful stock investing, but new studies from UCLA and the University of Chicago have helped to quantify just how much.

It turns out that investors with higher IQs do show stronger returns on their short-term investments. Specifically, high-IQ investors make 11 percent more on an annualized basis than lower-IQ investors after the first two days of an investment.

But after a month, the differences begin to wash out. In the long term, smart investors do no better than less-intelligent investors. In other words, in the long term, the market itself is smarter than any of the individual investors.

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