Working Paper: CEPR ID: DP3694
Authors: Luigi Guiso; Michael Haliassos; Tullio Jappelli
Abstract: We discuss the current state of stock ownership among households in major European countries (France, Germany, Italy, the Netherlands, Sweden and the UK), drawing parallels and contrasts with the US experience. We use detailed microeconomic datasets and explore the extent to which observed international differences in stockholding can be attributed to differences in household characteristics. Statistical analysis finds (1) an increase in stock market participation in all countries; (2) persistent differences across countries, with the US, the UK and Sweden having considerable more participation than France, Germany, Italy; (3) a robust correlation between the participation decision on the one hand, and wealth and education on the other; (4) a relatively small effect of education and wealth on the asset share invested in stocks, conditional on participation. Interestingly, international differences in stock market participation remain large even when we control for household characteristics. As our empirical results point to the relevance of participation costs, we probe into a number of indicators of such costs, and we find that these are consistent with the observed pattern of participation across countries. Since the lowering of such costs brings into the market households with different characteristics than incumbents, we discuss their likely impact, policy concerns, and types of policies that could mitigate their adverse impact on the future workings of the market.
Keywords: household finance; portfolio choice; stock ownership
JEL Codes: D80; E20; G10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stock market participation (G19) | Financial opportunities for households (G59) |
| Stock market participation (G19) | Greater volatility in stock markets (G17) |
| Household wealth (G59) | Stock market participation (G19) |
| Household education (I24) | Stock market participation (G19) |
| Participation costs (D23) | Stock market participation (G19) |
| Household characteristics (D19) | Stock market participation (G19) |
| Wealth increase (D31) | Probability of stock ownership (G19) |
| Reduction of participation costs (H43) | Stock market participation (G19) |