Dynamic Stock Market Participation of Households

Natalia Khorunzhina

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops and estimates a dynamic model of stock market participation, where consumers’ decisions regarding stock market participation are influenced by participation costs. The practical significance of the participation costs is considered as being a channel through which financial education programs can affect consumers’ investment decisions. Using household data from the Panel Study of Income Dynamics, I estimate the magnitude of the participation cost, allowing for individual heterogeneity in it. The results show the average stock market articipation cost is about 5% of labor income; however, it varies substantially over consumers’ life. The model successfully predicts the level of the observed articipation rate and the increasing pattern of stock market participation over the consumers’ life cycle.

Keywords: Portfolio Choice; Stock Market Participation; Dynamic Models; Discrete Choice Models; Panel Data (search for similar items in EconPapers)
JEL-codes: C33 D12 D91 G11 (search for similar items in EconPapers)
Date: 2011-11
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Related works:
Journal Article: Structural estimation of stock market participation costs (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35310

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