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Masters of the Stock Market

Author

Listed:
  • Kristjan Liivamägi
  • Tarvo Vaarmets
  • Tõnn Talpsepp

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.

Suggested Citation

  • Kristjan Liivamägi & Tarvo Vaarmets & Tõnn Talpsepp, 2014. "Masters of the Stock Market," TUT Economic Research Series 16, Department of Finance and Economics, Tallinn University of Technology.
    • Handle: RePEc:ttu:tuteco:16
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    References listed on IDEAS

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    Cited by:

    1. Tarvo Vaarmets & Kristjan Liivamägi & Tõnn Talpsepp, 2014. "The brilliant mind of investors," TUT Economic Research Series 15, Department of Finance and Economics, Tallinn University of Technology.
    2. Karin Kondor-Tabun & Karsten Staehr, 2015. "EU Cohesion Policy Funding in Estonia: Background, Developments and Challenges," TUT Economic Research Series 21, Department of Finance and Economics, Tallinn University of Technology.

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