Stock Market Participation Research Articles

Social Interaction and Stock Market Participation: A Study of Kathmandu Valley Investors

This research aims to explore how social interaction influences stock market participation in the Kathmandu Valley. It utilizes a descriptive and causal study design, applying a positivist approach to investigate the phenomenon. The focus is on understanding the effects of social interactions on individuals' involvement in the stock market within this specific geographical context. A questionnaire survey was conducted to collect data about factors influencing participation in the stock market. A total of 399 samples were gathered from this population using convenience sampling. The data was then analyzed using several statistical techniques. Reliability analysis was employed to assess the internal consistency of the measurement instruments. The results of the analyses found that internet usage, social norms/community influence, and the influence of friends/partners had a significant impact on whether someone participates in the stock market. However, there was no evidence that parental involvement in the stock market influences their children's participation. In summary, the study examined how different factors relate to individuals' participation in the stock market through a survey and statistical analyses of the collected data. Internet access, social environment, and peer influences were found to affect participation, but not parental involvement.

Fostering Future Investors: Analysing Determinants of Stock Market Participation Among Malaysian Students using PLS-SEM

Participation in the stock market is crucial for financial engagement and wealth creation. However, specific population segments, such as students from higher learning institutions, may exhibit lower stock market participation levels. Addressing this issue, this study uses the behavioral finance theory to examine how financial literacy, financial well-being, herding behavior, overconfidence bias, risk tolerance, social interaction, and investment intention influence stock market participation. Data was collected through a self-administered questionnaire distributed to 669 university students in Malaysia aged 17-30 years old. The findings reveal that financial literacy, herding behavior, risk tolerance, and social interaction positively influenced investment intention. The study also discovered that investment intention positively influences stock market participation. This study has made significant contributions to both theory and practice. Theoretically, this study contributes to the literature by confirming the positive relationship between financial literacy and investment intention. This study contributes to the development of more effective interventions and policies that not only educate students about an essential aspect of financial literacy but also prepare them for a financially secure future.

Stock Market Participation Awareness among University Students in Nepal

Financial Literacy amongst students is very important aspects. Therefore, as part of Financial Literacy, a study was conducted amongst 120 students of various colleges and fields to explore the awareness level of stock market investments in the Kathmandu valley. With a growing number of young investors entering the financial market, this research seeks to understand the factors that influence students' engagement with the stock market, particularly in a developing economy like Nepal. The study employs both qualitative and quantitative methodologies, including surveys distributed to students across various colleges in Nepal. Findings reveal that while there is moderate awareness about the stock market among students, actual participation remains limited. The main barriers include a lack of financial literacy, limited disposable income, and perceived risks associated with stock investments. Furthermore, cultural attitudes towards saving and investing also play a significant role in shaping students' engagement with the stock market. The research underscores the importance of integrating financial education from the school level itself to equip students with the knowledge and confidence to participate in the stock market. This study contributes to the existing literature on financial literacy and investment behaviors, offering insights into the unique challenges faced by students in developing countries like Nepal. It emphasizes the need for targeted interventions to enhance financial literacy and foster a more inclusive financial ecosystem.

An empirical analysis of stock market participation: from an Islamic perspective

Purpose In the verge of assessing Muslims’ participation in stock market, present study delved into evaluating the influence of Islamic religiosity (IR) on Muslim investor’s financial engagement factors with respect to stock market (i.e. financial literacy [FL], Islamic financial literacy [IFL], behavioural factors [BF], Shariah compliance [SC], technology adoption [TA] and institutional support [IS]), stock market participation (SMP) and financial well-being (FWB). Further, this study aims to examine the mediating role of IFL, TA and SMP and moderating role of IS. Design/methodology/approach Using a mixed-methods approach, a structured survey questionnaire was administered and responses have been collected from 319 Muslim investors from South India using stratified random sampling. Further, data was analysed using SPSS 20.0 and AMOS 20.0 by implementing one-way ANOVA, measurement model and structural equation model to assess the differences, mediating and moderating roles. Findings In this study, it is discovered that IR significantly impacts Muslim investor’s financial engagement factors, SMP and FWB. Further, it is explored that IFL accelerates the impact of FL and SC on SMP. The results also demonstrated the intervening role of TA in enhancing SMP through BF and the mediating role of SMP among Muslim investors with strong IR to attain and enjoy FWB. Interestingly, our study also argued that when the IS is more, the effect of IR on SMP is high. Research limitations/implications Geographical boundaries are restricted to India, where the study proposes future studies in Islamic countries to better understand the religious belief system of the investors, as SC may vary in different countries. Practical implications In accordance with the results, it is recommended that the regulatory bodies and institutions intervene, support and incorporate IFL and also provide user-friendly Tec platforms to monitor and filter stocks and financial products for SC. Social implications The present study intends to tackle the misconception of Islamic values with respect to participating in the stock market and recommends to undertake policy and regulatory framework to ensure the inclusive development of this community. Originality/value To the best of the authors’ knowledge, no studies so far have pondered on the mediating role of SMP in enhancing the effectiveness of IR on their FWB. Further, this study collectively examines the influence of IR on various financial engagement factors affecting SMP leading to FWB.

Stock market participation puzzle: a systematic review and bibliometric analysis

Stock market participation puzzle: a systematic review and bibliometric analysis

Like a moth to a flame: Do stock market bubbles exacerbate credit risks of peer‐to‐peer lending?

AbstractWe establish a causal link between stock market bubbles and credit risks from peer‐to‐peer lending. Employing a fuzzy regression discontinuity design based on retail investors' disproportional increase in stock market participation when the Shanghai Stock Exchange composite index exceeds 3500, we find that both the default rate and the degree of delinquency rise disproportionately for loans borrowed above the 3500 threshold. This effect is more pronounced among loans of lower quality and when borrowers are more overconfident and less risk averse. Overall, our results suggest that FinTech developments could amplify financial risks and induce contagion across markets.

The Influence of Financial Inclusion on Stock Market Participation in Nepal: Exploring the Mediating Effect of Financial Knowledge

This paper focuses on financial inclusion (FI), a fast-embracing topic with potential drivers of economic growth and the improvement of individual financial well-being. This study contributes to the existing literature by analysing how financial inclusion influences stock market participation (SMP) in Nepal, explicitly emphasising the intermediary role of economic knowledge. The study employed a causal-comparative research design, and the data were collected from 403 individual investors actively participating in the Nepal Stock Exchange (NEPSE) trading. The statistical tools used to meet the objectives of this research are descriptive statistics, factor analysis, and structure equation modelling. The study results show that FI and knowledge influence individual investor participation in the stock market. The result also indicates that FI is positively related to stock market activity, while it is essential to enhance citizens' FK significantly. Further, mediation analysis shows that FK partially mediates the relationship between FI and SMP. This suggests its pivotal role in narrowing the gap between access to financial services and actual investment behaviour. These findings underscore the critical role of FI in creating an inclusive and participatory financial ecosystem within Nepal. Longitudinal data in future research can capture the evolving dynamics of FI and its long-term impact on SMP.

Financial Risk Tolerance as a Mediator Between Financial Literacy and Stock Market Participation: Evidence From Single Men and Women

Anchored upon the theory of planned behavior, the study examines a mediator, financial risk tolerance, in the relationship between financial literacy and stock market participation among single men and women. Using data from the 2019 Survey of Consumer Finances, the study uncovers an indirect effect of financial literacy on stock market participation through the mediating role of financial risk tolerance. This effect is observed in both genders, with a more pronounced mediation effect for men than for women. The study suggests that this gender disparity in the mediating mechanism is driven by the stronger correlation between financial risk tolerance and stock market participation among men, as the study finds that men exhibit a higher propensity to invest in the stock market when their financial risk tolerance increases compared with women. Consequently, the study asserts that addressing the gender gap in stock market participation may hinge on empowering women to transform their financial risk tolerance into concrete investment actions.

The Relationship between Financial Literacy Misestimation and Misplacement from the Perspective of Inverse Differential Information and Stock Market Participation

The Relationship between Financial Literacy Misestimation and Misplacement from the Perspective of Inverse Differential Information and Stock Market Participation

Local IPOs and Household Stock Market Participation

Abstract The decrease in companies going public has received widespread attention, and the associated costs are widely debated. We document high local IPO activity leads to increases in stock market participation of 5–6%. This is striking given that such participation represents a key factor toward building wealth. Local IPOs increase both households’ propensity to own stock and their percent equity holdings. The attention channel drives effects: local IPOs attract attention to the market, through increased information production and publicity. The wealth channel has little influence, consistent with local IPOs not generating wealth shocks for most households.

A novel central bank digital currency framework design for offline and foreign transactions based on blockchain

Purpose Fiat money production necessitates physical commodities, increasing costs and its flow is challenging to monitor, making it vulnerable to criminal exploitation. Cryptocurrencies offer decentralized solutions, but their decentralization has led to illegal activities. Current cross-border transactions face high costs, resource intensity and lack of instant currency transfers. Offline transactions are essential in unreliable networks. Design/methodology/approach Here, the authors proposed the methodology to perform offline transactions based on card, quick response (QR) code and a foreign transaction framework with universal identification (UID) to perform cross-border transactions using blockchain-dependent central bank digital currencies (CBDCs). Implications for the financial system are also analyzed. Findings The proposed CBDC framework reduces illegal transactions, corruption and the cost of producing fiat money; eases overseas transactions; and eventually increases international tourism, trade and business between countries. It also reduces the processing fees. Offline framework found useful for performing retail-level transactions. Research limitations/implications The research methodology may face limitations due to diplomatic relations, political instability, sanctions and the need for robust offline transaction infrastructure. Practical implications The proposed CBDC framework simplifies debt and insurance management, tax collection, international trade, tourism and global stock market participation. However, implementing CBDCs in low-income countries presents challenges like extensive training, infrastructure and user acceptance issues. Social implications The adoption of CBDCs can enhance financial stability by reducing corruption and illegal transactions through improved traceability and monitoring, thereby curbing activities like terrorism. Originality/value Common framework for foreign transactions is based on the UID, and offline transaction framework is based on the sender’s QR code for multiple user applications.

Analyzing the impact of Social Interaction on Stock Market Participation: A Qualitative Study Using NVivo

Background: Stock market participation plays a crucial role in wealth creation and economic welfare. Prior studies show social interaction factors like parental guidance, partner opinions and online networks can influence such financial decisions. However, little is known about their combined impact in developing markets. Methods: This study analyzed the influence of social interaction on stock market participation in Kathmandu Valley, Nepal. Qualitative data was collected through interviews of 10 investors and analyzed using NVivo software. Tools included word clouds, cluster analysis, sentiment analysis and thematic coding. Results: Results indicated that while parents generally lacked knowledge, some were influenced by participating relatives. Partners motivated research through information sharing and encouragement. Community reputation had a positive effect. Internet emerged as the dominant information source compared to offline relationships. Moderately positive sentiments were observed for community, partner and internet influences. Conclusion: Social interactions, particularly through the internet, collectively contributed to stock market participation. However, parental influence was less direct. Partners influenced primary market involvement through discussions. This provides novel insights into socio-cultural determinants of equity investing in an emerging South Asian context. Novelty: The study makes an original qualitative assessment of multiple social drivers on capital market engagement in Kathmandu Valley, adding new dimensions for understanding household finance decisions and developing inclusive capital markets.

Trading Stocks Builds Financial Confidence and Compresses the Gender Gap

Abstract Many studies document low rates of financial literacy and suboptimal levels of participation in financial markets. These issues are particularly acute among women. Does this reflect a self-reinforcing trap? If so, can a nudge to participate in financial markets generate knowledge, confidence and further increase informed participation? We conduct a large field experiment that enables and incentivises working-age men and women—a challenging group to reach with standard financial training programs—to trade stocks for four to seven weeks. We provide no additional educational content. We find that trading significantly improves financial confidence, as reflected in stock market participation, objective and subjective measures of financial knowledge, and risk tolerance. These effects are especially strong among women. Participants also become more self-reliant and consult others less when making financial decisions.

Individualism and stock market participation

ABSTRACT This paper investigates the relation between a cultural orientation toward individualism and household stock market participation. We adopt an epidemiological approach to establish causality. Employing large samples of second-generation immigrants in the U.S. and Europe, we focus on how the cultural heritage of individuals from different origins influences their engagement in stock market participation. To verify this relationship, we utilize data from the the Current Population Survey (CPS) and the Survey of Health, Ageing and Retirement in Europe (SHARE). Our findings reveal that immigrants from countries with a stronger individualistic cultural orientation are more likely to participate in the stock market. Furthermore, by leveraging data from the U.S. Census and American Community Survey (ACS), we demonstrate that the positive effect of individualistic cultural heritage is amplified for immigrants whose parents have made significant cultural investments. Additionally, utilizing data from the General Social Survey (GSS) to identify cultural mechanisms, we uncover that individualism culture shapes immigrants’ beliefs by fostering trust and optimism. Overall, our empirical evidence underscores the profound and persistent of culture on household stock market participation.

Investor heterogeneity and global stock market participation

To what extent does investor heterogeneity influence decision to invest in stock market? We address this question by drawing on the behavioural economics literature and analyse the impact of national culture on stock market data of forty seven countries spanning from 2000 to 2022. Our findings demonstrate that investors’ heterogeneity significantly accounts for the variation in stock market participation and the results remain consistent despite many robustness checks.

The first is free: do employee stocks incentivize stock market participation?

Relatively few people participate in the stock market. We investigate whether getting employee stocks as part of one’s compensation makes people more likely to actively invest in stocks. We find the probability of actively participating in the stock market increases by 15% for those who have been given employee stocks. This lends strong support to cognitive costs in stock market entry. We further find that people predominantly increase direct stock holdings as opposed to indirect holdings via mutual funds. Despite the significant spillover effects from holding employee stocks and an overall larger fraction of individual wealth being invested into stocks, it does not result in well diversified investing.

A model for optimizing an investment portfolio in modern conditions

Subject. This article discusses the issues of improving the methodology for optimizing an investment portfolio in modern conditions. Objectives. The article aims to develop a model for optimizing the investment portfolio, taking into account the investor's risk profile and the limited budget. Methods. For the study, I used a comparative analysis, mathematical modeling in economics, machine learning methods, genetic algorithms, and the Python programming language. Results. The article presents the author-developed model of optimizing the investment portfolio of an enterprise, based on the symbiosis of individual elements and principles of the most effective methods of optimizing the investment portfolio, algorithms for their implementation, mathematical model and practical recommendations. Conclusions and Relevance. The combination of classical methods of investment portfolio optimization and machine learning in the model helps improve the accuracy of assessing the future return of assets and determine their weights in the investor's portfolio. The theoretical significance of the work lies in the fact that the scientific provisions that actualize the task of improving existing or developing new approaches to optimizing the investment portfolio are proved. The practical significance of the study lies in the fact that the presented model is of an applied nature, taking into account the risk profile of the investor, tactical and strategic goals of investment, and budget constraints. The results of the study may be of interest to novice stock market participants, experienced investors, IT specialists engaged in the creation of programs and robots for trading on the stock market using machine learning tools.

Stock Market Participation, Inequality, and Monetary Policy

Abstract Recent literature has shown that the fraction of liquidity-constrained households in the population critically determines the mix of transmission channels of monetary policy. In this article, we bring a different but important dimension of heterogeneity to the forefront: stock market participation. We show that the stock market participation rate not only shapes the mix of policy channels but also heavily affects the aggregate responses. This happens as direct rebalancing effects and indirect equilibrium effects into investment are both increasing in the number of stock market participants, reinforcing each other. We show this in a quantitative New Keynesian model designed to account for the population share of stock market participants, their position in the income and wealth distribution, and their saving rates. The model implies that, as stock market participation has increased since the 1980s, the power of monetary policy on the real economy has strengthened considerably.

Effects of adult children's marriage on household stock market participation: An event‐study difference‐in‐differences approach using Chinese micro data

AbstractThis paper examines households' stock market participation responses to a critical life‐cycle event, adult children's marriage. An event‐study difference‐in‐differences approach is employed to facilitate identification, which compares changes in the stock market participation behaviors of households that experience children's marriage with households that experience it later as well as households that never experience it. Exploiting household‐wide variations in exposure to children's marriage using the China Family Panel Studies data over the 2010–2020 period, this paper finds that 2 years after children's marriage, households significantly enhance their likelihood of participating in the stock market. Households' willingness to participate increases by 1.1 to 1.6 percentage points depending on specifications. This paper's finding supports time‐varying risk aversion at the household level. Mechanism analysis indicates that children's marriage raises household risk preferences because it mitigates parental old‐age support concerns and alleviates households' consumption commitment to housing and children.

Financial awareness, risk aversion and portfolio choice

ABSTRACT “The financial market participation puzzle remains one of the most explored yet unanswered areas in finance. We extend the debate of portfolio choice by examining stock and derivatives market participation by focusing on two key investor traits: financial awareness and risk aversion. We use an investor survey conducted by the Securities and Exchange Board of India (SEBI), covering over 15,000 Indian investor responses. We find that risk aversion is associated with a 20% lower probability of market participation, whereas risk-averse individuals having high financial awareness are around 3.3% more likely to participate in financial markets. Furthermore, financial awareness and risk aversion are more significant in areas with higher economic freedom and lower social capital. Our findings suggest that policymakers may consider tailored financial awareness programmes based on differences in risk aversion among the investors as both these characteristics have a combined relationship with financial market participation.