Household Stockholding in Europe: Where Do We Stand and Where Do We Go?

By Luigi Guiso, Tullio Jappelli, Michael Haliassos. Social Science Research Network, 2003

393 citations recorded by the source corpus.

We discuss the current state of stockownership among households in major European countries (France, Germany, Italy, the Netherlands, Sweden, and the UK), drawing parallels and contrasts with the US experience. We use detailed microeconomic datasets and explore the extent to which observed international differences in stockholding can be attributed to differences in household characteristics. Statistical analysis finds (1) an increase in stock market participation in all countries; (2) persistent differences across countries, with the US, the UK and Sweden having considerable more participation than France, Germany, Italy; (3) a robust correlation between the participation decision on the one hand, and wealth and education on the other; (4) a relatively small effect of education and wealth on the asset share invested in stocks, conditional on participation. Interestingly, international differences in stock market participation remain large even when we control for household characteristics. As our empirical results point to the relevance of participation costs, we probe into a number of indicators of such costs, and we find that these are consistent with the observed pattern of participation across countries. Since the lowering of such costs brings into the market households with different characteristics than incumbents, we discuss their likely impact, policy concerns, and types of policies that could mitigate their adverse impact on the future workings of the market.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/db87e7d131b605af602db2bbe2a7e259f76e4820

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Citations in the corpus

Peer performance and stock market entry (2012, neutral): “2 The low rates of stock market participation have attracted attention from both academics and policy makers (see, e.g., Mankiw and Zeldes 1991, Haliassos and Bertaut 1995, Guiso, Haliassos, and Jappelli 2003).”
Portfolio inertia and stock market fluctuations (2010, background): “Differential trading frequency can also influence stock market volatility, if new and inexperienced investors are more likely to switch participation status or to trade in response to market movements, as conjectured by Guiso et al. (2003).”
Model Uncertainty, Limited Market Participation and Asset Prices (2005, background): “For existence, define the aggregate demand by the right side of equations (24) and (25) and denote it by D(P ).”
Measuring financial integration in the euro area (2004, background): “In a broader sample that includes emerging markets, Griffin and Karolyi (1998) find that global industry factors explain only 4 percent of the variation in national stock markets.”
Who Wears the Pants? Gender Identity Norms and Intrahousehold Financial Decision‐Making (2017, neutral): “This paper focuses on substantial crosscountry differences in household stock market participation (Guiso et al., 2003). The observed differences are shaped by both institutional and cultural factors. Giannetti and Koskinen (2010) document that household stock market participation rate is positively”
Policies for Macrofinancial Stability: Options to Deal with Real Estate Booms (2011, background): “Typically, in advanced economies less than half of households own stock (directly or indirectly) while homeownership rate hovers around 65 percent (Guiso et al., 2003).2 In addition, the supply-side effects associated with house price dynamics can be substantial.”
Who Takes Risks When and Why: Determinants of Changes in Investor Risk Taking (2013, background): “Guiso et al. (2003) analyzed stock ownership in major European countries and also found that the percentage of wealth invested in the stock market was independent of investors’ absolute level of wealth.”
Financial literacy and retirement planning in Germany* (2011, neutral): “Financial literacy and retirement planning in Germany stock market capitalization in West Germany was rather low compared to other European countries or the US (Guiso et al. , 2003).”
Risk aversion vs. individualism: what drives risk taking in household finance? (2014, neutral): “One concept is to understand them broadly as transaction costs, ranging from trading costs to monitoring costs (Guiso, Haliassos, and Jappelli 2003).”
How to Deal with Real Estate Booms: Lessons from Country Experiences (2011, background): “This comparison is not specific to the U.S. and actually is more striking in some European economies, e.g., 23 percent of French households hold stocks but 56 percent are homeowners and the respective ratios in the U.K. are 34 and 71 percent (see, for instance, Guiso et al., 2003).”
Learning to Take Risks? The Effect of Education on Risk-Taking in Financial Markets (2018, neutral): “ 3 See Bertaut (1998); Guiso et al. (2003); Hong et al. (2004); Bogan (2008); and Christiansen, Joensen, and Rangvid (2008).”
Financial Literacy and Participation in the Derivatives Markets (2018, neutral): “…and Zeldes (1991), Blume and Zeldes (1994), Haliassos and Bertaut (1995), Bertaut and Starr (20 0 0), Attanasio et al. (2002), Brav et al. (2002), Guiso et al. (2003), Vissing-Jorgensen (2003), Guiso and Jappelli (2005), Guiso et al. (2008), Cardak and Wilkins (2009) and Bricker et al. (2011)…”
Participation Constraints in the Stock Market: Evidence from Unexpected Inheritance Due to Sudden Death (2011, neutral): “Although participation varies greatly across countries and has increased recently [Guiso, Haliassos, and Jappelli (2003), Giannetti and Koskinen (2010)], the overall impression is that participation is still low [Campbell (2006)].”
What Determines Debt Intolerance? The Role of Political and Monetary Institutions (2011, background): “8 participation is just one simple way to introduce this asymmetry.8 Parenthetically, limited nancial diversi cation for the poor has also been extensively documented (see Allen and Gale, 1994, 2007, Guiso et al. 2003).”