Dynamic Stock Market Participation of Households

Research output: Working paperResearch


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.
Original languageEnglish
Place of PublicationMünich
PublisherMünich University
Number of pages34
Publication statusPublished - 2011
SeriesMPRA Paper


  • Portfolio Choice
  • Stock Market Participation
  • Dynamic Models
  • Discrete Choice Models
  • Panel Data

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