Awareness and Stock Market Participation

Luigi Guiso () and Tullio Jappelli ()

No 4182, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The extent to which consumers are aware of available financial assets depends on the incentives of asset suppliers to spread information about the instruments they issue. We propose a theoretical framework in which the amount of information disseminated and the probability of individuals becoming aware of financial assets are correlated with the probability that, once informed, they will invest in the asset and negatively affected by the cost of spreading information. Social learning is a further channel through which potential investors may come to be informed about existing assets. While social learning may limit the production of financial information by assets suppliers, it increases the probability that individuals become financially aware. These predictions are supported by data on awareness of financial assets available in the 1995 and 1998 waves of the Italian Survey of Household Income and Wealth. Lack of financial awareness has important implications for understanding the stockholding puzzle and for estimating stock market participation costs.

Keywords: financial information; portfolio choice (search for similar items in EconPapers)
JEL-codes: D80 E20 G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-fin
Date: 2004-01
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Related works:
Working Paper: Awareness and Stock Market Participation (2003)
Working Paper: Awareness and Stock Market Participation (2005)
Journal Article: Awareness and Stock Market Participation (2005)
Journal Article: Awareness and Stock Market Participation (2005)
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