How Do Cognitive and Non-Cognitive Abilities Influence Stock Market Participation?

37 Pages Posted: 1 Feb 2017

See all articles by Tarvo Vaarmets

Tarvo Vaarmets

Tallinn University of Technology (TUT) - Department of Finance and Economics

Kristjan Liivamägi

Tallinn University of Technology (TUT) - Department of Finance and Economics

Tõnn Talpsepp

Tallinn University of Technology

Date Written: January 31, 2017

Abstract

We study how cognitive and non-cognitive abilities influence stock market participation and what distinguishes investors from non-investors. Combining five datasets enables to observe the effect of mental abilities in the finest detail. We find that economic activity and occupation as well as religion and other characteristics influence stock market participation. More intelligent investors have a higher probability to participate in the stock market but the effect is clearly smaller for women than for men. We conclude that stock market investors tend to be more ambitious, prone to risk and also more intelligent, but less restricted in their nature.

Keywords: behavioral finance, stock market participation, education

JEL Classification: G02, G11, I22, J24

Suggested Citation

Vaarmets, Tarvo and Liivamägi, Kristjan and Talpsepp, Tõnn, How Do Cognitive and Non-Cognitive Abilities Influence Stock Market Participation? (January 31, 2017). Available at SSRN: https://ssrn.com/abstract=2909394 or http://dx.doi.org/10.2139/ssrn.2909394

Tarvo Vaarmets

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3
Tallinn, 12618
Estonia

Kristjan Liivamägi

Tallinn University of Technology (TUT) - Department of Finance and Economics ( email )

Akadeemia tee 3
Tallinn, 12618
Estonia

Tõnn Talpsepp (Contact Author)

Tallinn University of Technology ( email )

Akadeemia tee 3
Tallinn, Harju 12618
Estonia

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