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Chapter 4: Q34E (page 227)

Stock market participation and IQ. Refer to The Journal of Finance (December 2011) study of whether the decision to invest in the stock market is dependent on IQ, Exercise 3.46 (p. 182). Recall that an IQ score (from a low score of 1 to a high score of 9) was determined for each in a sample of 158,044 Finnish citizens. Also recorded was whether or not the citizen invested in the stock market. The accompanying table gives the number of Finnish citizens in each IQ score/investment category. Which group of Finnish citizens (market investors or noninvestors) has the highest average IQ score?

IQ Score

Invest in market

No investment

Totals

1

893

4659

5552

2

1340

9409

10749

3

2009

9993

12002

4

5358

19682

25040

5

8484

24640

33124

6

10270

21673

31943

7

6698

11260

17958

8

5135

7010

12145

9

4464

5067

9531

Totals

44651

113393

158044

Short Answer

Expert verified

The highest average IQ score is 28.46 for IQ score 1.

Step by step solution

01

Given information

The table shows the citizens in each IQ score or investment category. Here, it is also recorded that the citizen are invested in the stock market.

02

Calculating highest average IQ score

IQ Score

Invest in market

No investment

Totals

Average

1

893

4659

5552

28.46

2

1340

9409

10749

14.7

3

2009

9993

12002

13.16

4

5358

19682

25040

6.31

5

8484

24640

33124

4.77

6

10270

21763

31943

4.94

7

6698

11260

17958

8.8






8

5135

7010

12145

13.01

9

4464

5067

9531

16.58





Thus, the highest average IQ is 28.46 for IQ score 1.

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