Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs

Research output: Contribution to conferencePaperResearchpeer-review

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 participation cost is about 5% of labor income; however, it varies substantially over consumers’ life. The model successfully predicts the level of the observed participation rate and the increasing pattern of stock market participation over the consumers’ life cycle.
Original languageEnglish
Publication date2012
Number of pages32
Publication statusPublished - 2012
EventThe 39th European Finance Association Annual Meeting (EFA 2012) - Copenhagen Business School, Frederiksberg, Denmark
Duration: 15 Aug 201218 Aug 2012
Conference number: 39
http://www.efa2012.org/

Conference

ConferenceThe 39th European Finance Association Annual Meeting (EFA 2012)
Number39
LocationCopenhagen Business School
CountryDenmark
CityFrederiksberg
Period15/08/201218/08/2012
Internet address

Cite this

Khorunzhina, N. (2012). Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs. Paper presented at The 39th European Finance Association Annual Meeting (EFA 2012), Frederiksberg, Denmark.
Khorunzhina, Natalia. / Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs. Paper presented at The 39th European Finance Association Annual Meeting (EFA 2012), Frederiksberg, Denmark.32 p.
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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 heterogeneityin it. The results show the average stock market participation cost is about 5{\%} of labor income; however, it varies substantially over consumers’ life. The model successfully predicts the level of the observed participation rate and the increasing pattern of stock market participation over the consumers’ life cycle.",
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Khorunzhina, N 2012, 'Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs' Paper presented at, Frederiksberg, Denmark, 15/08/2012 - 18/08/2012, .

Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs. / Khorunzhina, Natalia.

2012. Paper presented at The 39th European Finance Association Annual Meeting (EFA 2012), Frederiksberg, Denmark.

Research output: Contribution to conferencePaperResearchpeer-review

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T1 - Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs

AU - Khorunzhina, Natalia

PY - 2012

Y1 - 2012

N2 - 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 heterogeneityin it. The results show the average stock market participation cost is about 5% of labor income; however, it varies substantially over consumers’ life. The model successfully predicts the level of the observed participation rate and the increasing pattern of stock market participation over the consumers’ life cycle.

AB - 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 heterogeneityin it. The results show the average stock market participation cost is about 5% of labor income; however, it varies substantially over consumers’ life. The model successfully predicts the level of the observed participation rate and the increasing pattern of stock market participation over the consumers’ life cycle.

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KW - Discrete Choice Models

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Khorunzhina N. Dynamic Stock Market Participation of Households with Heterogeneous Participation Costs. 2012. Paper presented at The 39th European Finance Association Annual Meeting (EFA 2012), Frederiksberg, Denmark.