The Changing Pattern of Stock Ownership in the US: 1989–2013

Abstract

In 1989, 32 percent of US households reported some stock ownership, either directly, through a mutual fund, or through an investment held in a defined contribution retirement plan. Twelve years later, in 2001, more than half of all households – 53 percent – reported some stock ownership. Expansion of equity mutual fund ownership, inside and outside defined contribution retirement plans, was the central driver of this expansion. Direct stock ownership also rose over this period, from 17 to 21 percent. The growth of stock ownership slowed, and in some cases reversed, in the subsequent twelve years. The overall rate of stock ownership fell to 49 percent in 2013, and direct stock ownership declined to 14 percent. The substantial increase in stock ownership during the 1990s, and the slight decline since then, may help to distinguish among competing explanations for the low rate of overall stock market participation. There is some evidence that US households became more risk tolerant during the 1990s, and that the transactions costs of equity market participation declined. While transactions costs have not increased in the subsequent period, self-reported risk tolerance has declined. The rapid expansion of defined contribution retirement plans in the 1990s, and the slowdown in that expansion after 2001, is also an important factor in explaining the ownership pattern over time.