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Stock market aversion? Political preferences and stock market participation

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  • Kaustia, Markku
  • Torstila, Sami
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    Abstract

    We find that left-wing voters and politicians are less likely to invest in stocks, controlling for income, wealth, education, and other relevant factors. This finding from unique data sets in Finland is robust both at the zip code and at the individual level. A moderate left voter is 17-20% less likely to own stocks than a moderate right voter. The results are consistent with the idea that personal values are a factor in important investment decisions, in this case leading to "stock market aversion." The results are inconsistent with alternative explanations such as wealth effects, risk aversion, reverse causality, return expectations, or social capital.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 100 (2011)
    Issue (Month): 1 (April)
    Pages: 98-112

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    Handle: RePEc:eee:jfinec:v:100:y:2011:i:1:p:98-112

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Household finance Limited participation Political preference;

    References

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    Cited by:
    1. Di Giuli, Alberta & Kostovetsky, Leonard, 2014. "Are red or blue companies more likely to go green? Politics and corporate social responsibility," Journal of Financial Economics, Elsevier, vol. 111(1), pages 158-180.
    2. Bonaparte, Yosef & Kumar, Alok, 2013. "Political activism, information costs, and stock market participation," Journal of Financial Economics, Elsevier, vol. 107(3), pages 760-786.
    3. Kaustia, Markku & Knüpfer, Samuli & Torstila, Sami, 2013. "Stock ownership and political behavior: Evidence from demutualization," SAFE Working Paper Series 2, Center of Excellence SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    4. Arno Riedl & Paul Smeets, 2013. "Social Preferences and Portfolio Choice," CESifo Working Paper Series 4403, CESifo Group Munich.
    5. Khorunzhina, Natalia, 2011. "Dynamic Stock Market Participation of Households," MPRA Paper 35310, University Library of Munich, Germany.
    6. Kim, Incheol & Pantzalis, Christos & Park, Jung Chul, 2013. "Corporate boards' political ideology diversity and firm performance," Journal of Empirical Finance, Elsevier, vol. 21(C), pages 223-240.

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