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Windfall Gains and Stock Market Participation

Joseph Briggs (), David Cesarini (), Erik Lindqvist () and Robert Östling ()

No 21673, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the causal effect of wealth on stock market participation using administrative data on Swedish lottery players. A $150,000 windfall gain increases stock ownership probability among pre-lottery non-participants by 12 percentage points, while pre-lottery stock holders are unaffected. The effect is immediate, seemingly permanent and heterogeneous in intuitive ways. Standard lifecycle models predict wealth effects far too large to match our causal estimates under common calibrations. Additional analyses suggest a limited role for explanations such as procrastination or real-estate investment. Overall, results suggest that “nonstandard” beliefs or preferences contribute to the nonparticipation of households across many demographic groups.

JEL-codes: D1 G02 G11 (search for similar items in EconPapers)
Date: 2015-10
Note: AP
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Published as Joseph Briggs & David Cesarini & Erik Lindqvist & Robert Östling, 2020. "Windfall Gains and Stock Market Participation," Journal of Financial Economics, .

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Journal Article: Windfall gains and stock market participation (2021) Downloads
Working Paper: Windfall Gains and Stock Market Participation (2015) Downloads
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