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Dispositional optimism (and pessimism), wealth, and stock market participation

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  • Grevenbrock, Nils

Abstract

In this paper I analyze the relationship between dispositional optimism (pessimism) and saving decisions. The key contribution of this paper is the use of direct psychometric measures of psychological dispositions as available in the Health and Retirement Study (HRS). The psychometric measures allow me to control for optimism and pessimism separately. Dispositional pessimism is shown to be significantly related to wealth holdings and stock market participation — optimism is not significantly related. A one standard deviation decrease in pessimism is associated with holding 64 thousand US-$ more overall wealth and an increase in the likelihood of holding stocks of 2.4%.

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  • Grevenbrock, Nils, 2020. "Dispositional optimism (and pessimism), wealth, and stock market participation," Journal of Economic Psychology, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:joepsy:v:81:y:2020:i:c:s016748702030088x
    DOI: 10.1016/j.joep.2020.102328
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    References listed on IDEAS

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    1. Sanna Nivakoski, 2020. "Wealth and the effect of subjective survival probability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 33(2), pages 633-670, April.
    2. Nils Grevenbrock & Max Groneck & Alexander Ludwig & Alexander Zimper, 2021. "Cognition, Optimism, And The Formation Of Age‐Dependent Survival Beliefs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(2), pages 887-918, May.
    3. Angelini, Viola & Bertoni, Marco & Stella, Luca & Weiss, Christoph T., 2019. "The ant or the grasshopper? The long-term consequences of Unilateral Divorce Laws on savings of European households," European Economic Review, Elsevier, vol. 119(C), pages 97-113.
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    Cited by:

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    More about this item

    Keywords

    Dispositional optimism; Household finance; Saving behavior;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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