Information Sharing and Stock Market Participation PDF Download

Author: Geng Li
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Olga Balakina
Publisher:
ISBN:
Category :
Languages : en
Pages : 73

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We introduce an equilibrium model of the stock market participation rate with a social network. We study how information sharing through a network affects the decision to enter the stock market and how social connectivity interacts with individual income and financial literacy to create heterogeneity in stock market participation levels. We analyze how the equilibrium participation level depends on the intensity of social interactions, and provide an algorithm for finding the equilibrium stock market participation level. We test the predictions from the model using Facebook county-level connectivity data. We find the model with social networks outperforms standard models without networks in predicting heterogeneity of equilibrium stock market participation over the income distribution, explaining non-participation among wealthy agents.

Author:
Publisher:
ISBN:
Category : Social interaction
Languages : en
Pages : 64

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Author: Adrian Schmid
Publisher:
ISBN: 9783346001054
Category :
Languages : en
Pages : 28

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Academic Paper from the year 2014 in the subject Business economics - Investment and Finance, grade: 1.3, University of Frankfurt (Main), language: English, abstract: The field of household finance is confronted with the phenomena called "stock market participation puzzle" (Haliassos, 2003) which describes that most households do not hold stocks, despite that there are higher expected returns on stocks than on risk free assets (Haliassos, 2003). According to Haliassos and Bertaut (1995), 75% of households in the United States do not own stocks directly although returns on equity exceed the returns on risk free assets. This issue does not only concern households themselves, financial intermediaries, and stock issuers. It is also relevant for questions concerning privatisation, asset pricing, and tax rates on capital gains (Haliassos and Bertaut, 1995). The participation rate can directly affect the equity premium as argued by Mankiw and Zeldes (1991), and Heaton and Lucas (1999). Stock market participation in this seminar thesis refers to households participating in the market by holding stocks, excluding retirement accounts. The purpose is to demonstrate five factors discussed in financial literature that contribute to solve the stock market participation puzzle or reasons why limited stock market participation can be observed: Deviation from standard expected utility (Haliassos, 2003; Epstein and Zin, 1990; Haliassos and Hassapis, 1999; Diecidue and Wakker, 2001; Haliassos and Bertaut, 1995), more restricted borrowing constraints (Constantinides, Donaldson, and Mehra, 2002; Cocco, Gomes, and Maenhout, 2005; Haliassos, 2003), participation and entry costs (Guiso and Japelli, 2004; Gollier, 2002; Haliassos and Michaelides, 2003; Paiella, 2001; Vissing-Jorgensen, 2002; Haliassos, 2003), lack of financial awareness (Guiso and Jappelli, 2004), and financial illiteracy (van Rooij, Lusardi, and Alessie, 2007; Arrondel, Debbich, and Savignac, 2012; King and Leape, 1987).

Author: Jeffrey D. Kubik
Publisher:
ISBN:
Category :
Languages : en
Pages : 47

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We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given quot;socialquot; investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among quot;non-socialsquot;. It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households-defined as those who interact with their neighbors, or who attend church-are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.

Author: Harrison Hong
Publisher:
ISBN:
Category : Anlageverhalten / Theorie / Schätzung / USA
Languages : en
Pages : 46

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We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given 'social' investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among 'non-socials'. It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households - defined as those who interact with their neighbors, or who attend church - are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher

Author: Steffan G. Ball
Publisher:
ISBN:
Category : Investment analysis
Languages : en
Pages : 46

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Author: Jing Jian Xiao
Publisher: Springer
ISBN: 3319288873
Category : Psychology
Languages : en
Pages : 379

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Book Description
This second edition of the authoritative resource summarizes the state of consumer finance research across disciplines for expert findings on—and strategies for enhancing—consumers’ economic health. New and revised chapters offer current research insights into familiar concepts (retirement saving, bankruptcy, marriage and finance) as well as the latest findings in emerging areas, including healthcare costs, online shopping, financial therapy, and the neuroscience behind buyer behavior. The expanded coverage also reviews economic challenges of diverse populations such as ethnic groups, youth, older adults, and entrepreneurs, reflecting the ubiquity of monetary issues and concerns. Underlying all chapters is the increasing importance of financial literacy training and other large-scale interventions in an era of economic transition. Among the topics covered: Consumer financial capability and well-being. Advancing financial literacy education using a framework for evaluation. Financial coaching: defining an emerging field. Consumer finance of low-income families. Financial parenting: promoting financial self-reliance of young consumers. Financial sustainability and personal finance education. Accessibly written for researchers and practitioners, this Second Edition of the Handbook of Consumer Finance Research will interest professionals involved in improving consumers’ fiscal competence. It also makes a worthwhile text for graduate and advanced undergraduate courses in economics, family and consumer studies, and related fields.

Author: Andreas Fagereng
Publisher:
ISBN:
Category :
Languages : en
Pages :

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We study the life cycle of portfolio allocation following for 15 years a large random sample of Norwegian households using error-free data on all components of households' investments drawn from the Tax Registry. Both, participation in the stock market and the portfolio share in stocks, have important life cycle patterns. Participation is limited at all ages but follows a hump-shaped profile which peaks around retirement; the share invested in stocks among the participants is high and flat for the young but investors start reducing it as retirement comes into sight. Our data suggest a double adjustment as people age: a rebalancing of the portfolio away from stocks as they approach retirement, and stock market exit after retirement. Existing calibrated life cycle models can account for the first behavior but not the second. We show that incorporating in these models a reasonable per period participation cost can generate limited participation among the young but not enough exit from the stock market among the elderly. Adding also a small probability of a large loss when investing in stocks, produces a joint pattern of participation and of the risky asset share that resembles the one observed in the data. A structural estimation of the relevant parameters that target simultaneously the portfolio, participation and asset accumulation age profiles of the model reveals that the parameter combination that fits the data best is one with a relatively large risk aversion, small participation cost and a yearly large loss probability in line with the frequency of stock market crashes in Norway.

Author: Jeffrey R. Brown
Publisher:
ISBN:
Category :
Languages : en
Pages : 44

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This paper provides direct evidence of a causal link between the stock market participation of individuals and that of the other members of the community in which they reside. We first establish the presence of a robust positive correlation between the probability that an individual owns stock and the level of stock market participation of one's community, as measured by reporting dividend income on tax returns. We also show that conditional on owning stock, an individual is likely to own more (relative to income) when community ownership is higher. These results are robust to a wide range of individual and community controls, including measures of the importance of local firms (which have large independent effects), and specification checks to ensure that the relation is not driven solely by ownership of stock of one's employer. We then provide evidence that this community effect is at least partially driven by word of mouth by showing that the effect is stronger in more sociable communities. To demonstrate causality, we employ a novel instrumental variables strategy that uses the stock ownership rates of the non-local parents of one's local peers to instrument for community ownership. Further, we also control for heterogeneity in risk preferences by including individual-level fixed effects. We conclude that a ten percentage-point increase in equity market participation of the members of one's community makes it four to five percentage points more like the individual will invest in stocks. We also provide estimates of a direct parental effect, as well as suggestive evidence that one's home state may have lasting effects on one's stock market participation.