Stock Market Ownership Transitions

Yosef Bonaparte, George Korniotis, Alok Kumar, Alexander Michaelides and Yuxin Zhang

No 19512, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. A life-cycle model with participation costs cannot match the observed ownership dynamics, but an extension with stock-market crash better fits the average participation rate and ownership transitions of the middle-aged and retired. This extended model does not match the ownership dynamics of the young, which are better captured by a model with elevated income risk. Overall, these findings indicate that ownership transitions respond to wealth shocks across the life-cycle, both in our model and the data.

Keywords: Trading costs; Life-cycle model (search for similar items in EconPapers)
JEL-codes: D14 G11 G12 (search for similar items in EconPapers)
Date: 2024-09
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