Impact of financial environment on household risk financial asset selection: A micro perspective

Abstract

This study establishes an index system called micro permeation of financial environment (MPFE) that reflects the financial environment using consumer finance data in the United States for the years 2013 and 2016. This study compensates for the paucity of research on the financial environment from a macro viewpoint that cannot account for individual differences. From the micro perspective, this study empirically investigates the influence of MPFE on the household portfolio through comprehensive and detailed circumstances. However, from a broader perspective, the financial micro penetration index has a significant positive effect on household involvement and participation depth in risk financial and stock markets. In addition, findings present the significant but different effects of each component of MPFE on household participation rate and depth in risk financial and equity markets. The empirical findings are robust to endogeneities and provide insightful implications.