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Temperance in Stock Market Participation: Evidence from France

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  • LUC ARRONDEL
  • HECTOR CALVO PARDO
  • XISCO OLIVER

Abstract

We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stock market, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Since recent extensions highlight the importance of the correlation between earnings and financial risks, here we use a self-assessed proxy from the DELTA-TNS 2002 cross-sectional survey to empirically assess the impact. Although income risk does not affect the participation decision of households' reporting a negative correlation, it does lower the participation of those who report a non-negative sign, consistent with economic theory predictions. Copyright (c) The London School of Economics and Political Science 2008.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 77 (2010)
Issue (Month): 306 (04)
Pages: 314-333

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Handle: RePEc:bla:econom:v:77:y:2010:i:306:p:314-333

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Cited by:
  1. Eichner, Thomas & Wagener, Andreas, 2012. "Tempering effects of (dependent) background risks: A mean-variance analysis of portfolio selection," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 422-430.
  2. Guo, Xu & Wong, Wing-Keung & Zhu, Lixing, 2013. "Two-moment decision model for location-scale family with background asset," MPRA Paper 43864, University Library of Munich, Germany.
  3. Arrondel, Luc & Savignac, Frédérique, 2010. "Stockholding : Does housing wealth matter ?," Economics Papers from University Paris Dauphine 123456789/8576, Paris Dauphine University.

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