Stock Market Participation Decisions Research Articles

Social support and household stock market participation

This study investigates the relationship between social support and stock market participation using data from the China Household Finance Survey (CHFS). Both intangible and tangible dimensions of social support are explored to examine their impact on stock market participation decisions. The empirical findings demonstrate that both support dimensions (i.e., intangible and tangible) would positively influence stock market participation, and intangible support has a greater impact as compared to tangible support. Moreover, this paper offers physical health and mental happiness to explain the mechanisms of social support.

Accounting Quality and Household Stock Market Participation

SYNOPSISRecent research documents that there is significant variation in stock market participation by state and suggests that there may be state-specific factors that determine stock market participation of U.S. households. Using household survey data, we examine how state-level, public-company accounting quality affects households’ stock market participation decisions. We find that households residing in states where local public companies have better accounting quality are more likely to invest in stocks. Also, those households invest greater amounts of their wealth in the stock market. Furthermore, we present some evidence that accounting quality affects stock market participation through local press coverage. Additional cross-sectional tests show that the effect of accounting quality on stock market participation is more pronounced among less affluent and less educated households, consistent with prior findings that familiarity with and trust in the stock market are more important for those types of households to make stock investments.JEL Classifications: D14; G11; M41.

Geopolitical risk and household stock market participation

I find that the index of geopolitical risk (GPR) is significantly associated with both the extensive and intensive margins of stock market participation decisions. The GPR index subsumes the significance of economic policy uncertainty for stock market participation decisions and has long-lasting effects for up to 12 months. I further investigate the economic channel through which the GPR index is associated with stock market participation. Empirical evidence suggests that it is a link between the GPR index and financial uncertainty that drives the results. However, I do not find evidence supporting the income uncertainty channel.

Does Social Connectedness Affect Stock Market Participation?

Using IRS tax filing data, I show that social network and word-of-mouth communications play an important role in stock market participation decisions. Using a novel dataset from Facebook, I construct a measure of social network friends' participation for US counties and find that a one-percentage point increase in friends' participation increases the focal county participation by 14 to 25 basis points in the following year. For identification strategy, I employ the revelation of financial misconducts as an exogenous negative shock to local participation rate and show that the instrumented change in friend participation significantly and positively predicts the change in focal county participation rates. The increase in participation rates among the low-income households induced by friends' participation decreases the Gini coefficients in metropolitan counties in the following two years. The evidence suggests that social influences and peer effects contribute to the cross-sectional differences in the stock market participation rates across US counties and may lead to lower income inequality.

How Investors Attitudes Shape Stock Market Participation in the Presence of Financial Self-Efficacy.

The purpose of this study is to investigate how investor’s money attitudes shape their stock market participation (SMP) decisions. This study followed the theory of planned behavior (TPB), and a survey was conducted to collect the responses from active investors. Structural equation modeling (SEM) was used for the analysis of proposed relationships among the constructs, and a confirmatory factor analysis (CFA) was conducted to check the interrelation of the variables and validity of the constructs. This research has concluded that investor’s money attitudes are significant to affect their stock market participation decisions. Further, it was found that risk attitudes partially mediate the relationship between money attitudes and stock market participation. Moreover, financial knowledge and financial self-efficacy positively moderated the relationship between money attitudes and stock market participation. This research is one of the early attempts at studying the money attitudes of investors and introduces financial self-efficacy as a moderating construct between money attitudes and stock market participation. The sample size for this study was 250 respondents which can be increased in future research, and the same relationships can be tested by using a larger sample. Moreover, this study has used money attitudes as predictors of stock market participation. Still, many other variables, like personal value, can also be taken to investigate their influence on stock market participation.

The Inelastic Market: Heterogeneous Wealth Dynamics, Consumption Shares and Beliefs

Investigating stockholder consumption growth is critical in asset pricing studies, as preference of stockholders differs from that of average households. The disagreement among households about the macroeconomic uncertainty leads to their heterogeneous stock market participation decisions, and allows both stockholders and non-stockholders to be fully irrational. This paper provides a new link between stockholder consumption and market returns when stock market is inelastic, and derives stockholder consumption growth dynamics. Exposure to stockholder consumption risks explains over a half cross-sectional equity return variations.

Relationship Between Financial Literacy of Individual Investors and Stock Market Participation Decision Among Secondary School Teachers from Nakuru County, Kenya

Relationship Between Financial Literacy of Individual Investors and Stock Market Participation Decision Among Secondary School Teachers from Nakuru County, Kenya

Moderating Effect of Culture on the Relationship between Social Interaction and Stock Market Participation among Secondary School Teachers from Nakuru County, Kenya

Culture makes individuals to behave the same way in similar situations because of the values and norms grounded in a person. This means that the overall behavior of individual investors is therefore guided by their individual culture. Culture could influence the behavior of individual investors directly and this study sought to investigate how culture could interact with social interaction in influencing individual investor stock market participation. There was need therefore to investigate the moderating effects of investment culture on the relationship between social interaction and stock market participation of secondary school teachers in Nakuru County. The study employed cross sectional survey research design. Primary data was collected using structured questionnaires from a sample of 320 teachers' selected using stratified proportionate random sampling technique. The study concludes that investment culture has a positive significant moderating effect on the relationship between social interaction and stock market participation decision (R2 change was 0.04, p<0.05). This implies that investment culture interacts with social interaction thereby significantly enhancing its relationship with stock market participation of secondary school teachers in Nakuru County.

Relationship Between Risk Aversion Of Individual Investors And Stock Market Participation Decision Among Secondary School Teachers From Nakuru County, Kenya

Relationship Between Risk Aversion Of Individual Investors And Stock Market Participation Decision Among Secondary School Teachers From Nakuru County, Kenya

Relationship between Social Interaction of Individual Investors and Stock Market Participation Decision among Secondary School Teachers from Nakuru County, Kenya

Relationship between Social Interaction of Individual Investors and Stock Market Participation Decision among Secondary School Teachers from Nakuru County, Kenya

Understanding cross-regional differences in stock market participation: the role of risk preferences

Previous research on the effect of risk preferences on stock market participation (SMP) has applied an individual-based approach without modelling how contextual factors may influence individuals’ attitudes. By adopting an ‘interactionist approach’, this article explores the role of the region’s risk attitudes in the SMP decision, together with individuals’ risk preferences. Using a sample of 57,491 individuals living in 60 European regions in 2013 and applying multilevel modelling, the results confirm that the region’s risk attitudes, together with individual characteristics, are driving forces of SMP. Therefore, future policies and reforms aimed at increasing SMP should take into account not only the existence of individual differences among Europeans but also the existence of differences in cultural region factors.

No pain, no gain? Household beliefs and stock market participation

This paper investigates whether household beliefs on the determinants of success affect their stock market participation decisions. Using national survey data from China, I show that Chinese households believe that personal effort is the most influential factor in people’s success, followed by family social connections, aptitude, and luck. Moreover, households that believe more in effort are less likely to participate in the stock market, while those who place more emphasis on family social connections are more likely to participate. The negative (positive) effects of effort (family social connections) are more profound for agricultural (workplace-affiliated) households. Further, I offer belief mechanisms to explain the heterogeneity of stock market participation for different occupations.

Income and social communication: The demographics of stock market participation

AbstractThis paper analyses the determinants of stock market participation decisions using officially compiled aggregate stock account opening data in China. Different from the literature that often focuses on one particular dimension, our paper systematically evaluates the relative importance of disposable income, demographic variables, macroeconomic factors, stock market conditions and social communication on both the level and the change of the participation rate. We find that the level of the participation rate is predominately determined by the income factor, followed by various measures of social communication. Social communication plays the most important role in the change of the participation rate, acting as a multiplier to stimulate stock market participation. The effects are more pronounced in high‐income, high‐education, high‐population‐density groups and during the bull market period.

The precision of subjective data and the explanatory power of economic models

Subjective expectations are important primitives in many economic models, yet their direct measurement often yields imprecise and inconsistent data. This has previously been treated as a pure measurement error problem. In contrast, this paper argues that the individual-level precision of such data may reflect the structure of the underlying decision process. We estimate a semiparametric double index model on data specifically collected for this purpose and show that stock market participation decisions exhibit little variation in economic model primitives when individuals provide error-ridden belief statements. In contrast, beliefs and risk preferences predict strong variation in stock market participation for individuals who report precise expectations measures.

Neighbors Matter: Causal Community Effects and Stock Market Participation

This paper establishes a causal relation between an individual's decision of whether to own stocks and average stock market participation decision of the individual's community. We instrument for the average ownership of an individual's community with lagged average ownership of the states in which one's non-native neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-by-year effects, rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities.

Determinants of Stock Market Participation Decision：

Determinants of Stock Market Participation Decision：