 Political activism, information costs, and stock market participationYosef Bonaparte and Alok Kumar Journal of Financial Economics, 2013, vol. 107, issue 3, 760-786 Abstract: This paper examines whether political activism increases people's propensity to participate in the stock market. Our key conjecture is that politically active people follow political news more actively, which increases their chance of being exposed to financial news. Consequently, their information gathering costs are likely to be lower and the propensity to participate in the market would be higher. We find support for this hypothesis using multiple micro-level data sets, state-level data from the US, and cross-country data from Europe. Irrespective of their political affiliation, politically active individuals are 9–25% more likely to participate in the stock market. Using residence in “battleground” states and several other geographic instruments, we demonstrate that greater political activism reduces information gathering costs and causes higher market participation rates. Further, consistent with our conjecture, we find that politically active individuals spend about 30 minutes more on news daily and appear more knowledgeable about the economy and the markets. Keywords: Stock market participation; Political activism; Information costs; Individual investors; Geographic instruments (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:107:y:2013:i:3:p:760-786 DOI: 10.1016/j.jfineco.2012.09.012 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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