Financial Literacy, Human Capital and Stock Market Participation in Europe

Ashok Thomas () and Luca Spataro
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Ashok Thomas: Indian Institute of Management

Journal of Family and Economic Issues, 2018, vol. 39, issue 4, No 2, 532-550

Abstract: Abstract Households’ stock market participation has significant effects on savings and on an economy’s financial development and performance. Yet participation into capital markets is limited and quite heterogonous both among and within several countries. This phenomenon represents an empirical puzzle whose understanding is rather incomplete. In this work, we exploited a combination of datasets for nine European countries and used different econometric specifications that allow to control for endogeneity of financial literacy and human capital, to assess the role of several variables in affecting the probability to participate in the stock market in year 2010. Besides socio-demographic variables, we found that financial literacy has a positive and significant effect on stock market participation, together with the level of human capital and social interaction. Country level differences are explained by such institutional factors as the effectiveness of the education system and by the attractiveness of the stock markets.

Keywords: Stock market participation; Financial literacy; Social interaction; Education quality; Europe (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (16)

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DOI: 10.1007/s10834-018-9576-5

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