@article{b397f832e11847bf9d8b8593058ead4f,
title = "IQ and mutual fund choice",
abstract = "We show that cognitive ability influences mutual fund choice: high-IQ investors avoid funds with high management fees. Two competing stories can explain this phenomenon. One is that high-IQ consumers benefit less from costly services, as they find it easier to make informed financial decisions without external help. The alternative story is that these investors are less likely to overpay for the services they receive because they are either better judges of value or more capable of discerning the price charged for these services. A comprehensive data set of Finnish males' fund holdings supports both stories: consistent with the first story, high-IQ investors tend to avoid funds sold via expensive service-intensive channels and prefer a mix of equity and bond funds to expensive readily packaged balanced funds. Consistent with the alternative story, IQ and fees are inversely correlated, even after controlling for many fund services, including any operating at the fund family level.",
keywords = "Education, Fees, IQ, Mutual Fund, Portfolio Choice",
author = "Mark Grinblatt and Seppo Ik{\"a}heimo and Matti Keloharju and Samuli Kn{\"u}pfer",
note = "Funding Information: The authors thank Statistics Finland, the Finnish Armed Forces, and the Finnish Tax Administration for providing data, as well as Antti Lehtinen, Tomi Fyrqvist, Petri Hukkanen, Visa Penttil?, Juhana Tikkanen, Patrik Wikberg, and Shilei Zhang for their superb research assistance. Their appreciation also extends to the editor (Wei Jiang), the associate editor, two referees, Santosh Anagol, Bruce Carlin, Darwin Choi, Joao Cocco, Thomas Copeland, Stefano DellaVigna, Cesare Fracassi, Xavier Gabaix, Vito Gala, Bing Han, Brandon Julio, Antti Lehtoranta, Juhani Linnainmaa, Kanishka Misra, Vesa Puttonen, Stephen Ross, Antoinette Schoar, Henri Servaes, Paolo Sodini, Roine Vestman, and Juuso V?lim?ki for insights that benefited this paper, and conference and seminar participants at the 2010 American Economic Association meetings, the 2013 American Finance Association meetings, the 2012 Duisenberg Workshop on Behavioral Finance, the 2011 European Finance Association meetings, the Helsinki Corporate Governance Conference, the 2012 Helsinki Finance Summit, the 2012 Jackson Hole Finance Conference, the Hong Kong Symposium of Household Finance, the 2012 National Bureau of Economic Research Household Finance meeting at Oxford, the Universit? della Svizzera italiana (USI) Lugano Conference, Aalto University, Aarhus University, London Business School, Mannheim University, Michigan State University, New York University, Norwegian School of Economics, the University of California at Berkeley, the University of California at San Diego, the University of Chicago, the University of New South Wales, the University of San Diego, the University of Stirling, the University of Texas at Austin, and the University of Washington. Financial support from the Academy of Finland, the Finnish Cultural Foundation, the Laurence and Lori Fink Center for Finance and Investments, the Nasdaq OMX Nordic Foundation, the OP-Pohjola Foundation, and the Research Foundation for Savings Bank is gratefully acknowledged. Publisher Copyright: {\textcopyright} 2016 INFORMS.",
year = "2016",
month = apr,
doi = "10.1287/mnsc.2015.2166",
language = "English",
volume = "62",
pages = "924--944",
journal = "Management Science",
issn = "0025-1909",
publisher = "Institute for Operations Research and the Management Sciences (INFORMS)",
number = "4",
}