Trusting the stock market

  • We provide a new explanation to the limited stock market participation puzzle. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stock, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. The calibration of the model shows that this problem is sufficiently severe to account for the lack of participation of some of the richest investors in the United States as well as for differences in the rate of participation across countries. We also find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. Klassifikation: D1, D8

Download full text files

Export metadata

Additional Services

Share in Twitter Search Google Scholar
Metadaten
Author:Luigi Guiso, Paola Sapienza, Luigi Zingales
URN:urn:nbn:de:hebis:30-23396
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,27
Series (Serial Number):CFS working paper series (2005, 27)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2005/12/20
Tag:Portfolio Choice; Stock Market Participation; Trust
GND Keyword:Aktienmarkt; Vertrauen; Portfolio Selection; Portfoliomanagement
HeBIS-PPN:197420222
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht