How High-IQ People Make Money In The Stock Market

Interesting article, obviously written by someone of above average IQ who has had success day-trading.

The market is 99% efficient, but that 1% allows smart people to make money consistently even as the left insists the market is rigged, a zero-sum game, or a bubble. The ‘blank-slate’ left believes that people can only succeed with the help of external factors – the nanny state, tons of practice, cronyism, nepotism, favoritism – never genes or innate talent. And what could be called reverse-Darwinism, the left wants more public resources to help the cognitively weak and inferior – not to advance the superior, who create economic value.

Anyway, back to the topic of trading, the empirical evidence suggests that high-IQ people are more likely to succeed at trading compared to lower-IQ traders. From the Journal of Financial Economics: IQ, trading behavior, and performance$

We analyze whether IQ influences trading behavior, performance, and transaction costs.
The analysis combines equity return, trade, and limit order book data with two decades
of scores from an intelligence (IQ) test administered to nearly every Finnish male of
draft age. Controlling for a variety of factors, we find that high-IQ investors are less
subject to the disposition effect, more aggressive about tax-loss trading, and more likely
to supply liquidity when stocks experience a one-month high. High-IQ investors also
exhibit superior market timing, stock-picking skill, and trade execution.

This doesn’t surprise me. Whether it’s writing, coding, chess, or even stock trading (which the left insists is random and rigged), at any cognitive endeavor it seems the high-IQ people keep coming out on top, even when controlling for practice and socioeconomic backgrounds. Practice does help, but just like no amount of practice will make a person with an of IQ of 90 grasp the subtitles of general relativity, no amount of practice will elucidate the subtleties of market behavior for the average-IQ trader. If the market is 99% percent efficient, it would be reasonable to assume you would need to be of the top 1% intellect (an IQ >135) to find the small inefficiencies. But as Gladwell Vs. Pinker & Charles Murray book sales show, there is a bigger market for fairy tales than cold-hard-biological reality. Tell people that IQ is just a social construct or that IQ, if it exists, doesn’t measure anything important, tell people that if they fail it’s because greedy rich people are holding them down…that’s the ticket to publishing success.

Related:

People Beat the Market Because of IQ, Not Conspiracies
Stock Strategies & ‘Fundamental Drift’
What the Mohammad Islam Hoax Says About Trading and Liberalism

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