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More Households in the Stock Market Through Privatizations? Evidence from Italy

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Author Info

  • Giovanni Ferri

    ()
    (University of Bari)

  • Cecilia Frale

    ()
    (Ministry of Economy and Finance (Government of Italy) and University of Tor Vergata, Rome)

  • Ottavio Ricchi

    ()
    (Ministry of Economy and Finance (Government of Italy))

Abstract

It is believed that privatizations substantially influenced both stock market structure and households’ portfolio decisions throughout the 1990s. However, through which channels did that materialize? Using both Bank of Italy SHIW data and a unique set of surveys made on the occasion of Public Offerings (POs) of state owned companies during 1995-99, we test whether privatizations attracted new households to share investment by increasing potential investors’ knowledge of stock risk/return characteristics via accompanying advertising campaigns. We show that advertising increased households’ awareness of each incoming PO, and so fostered their propensity to subscribe to it. Furthermore, such propensity also grew as households became better informed about past privatizations and perceived an improvement in the institutional setting of financial market, largely related to privatizations. Thus, privatizations expanded households’ share participation in Italy.

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Bibliographic Info

Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 64 (2005)
Issue (Month): 1 (September)
Pages: 93-132

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Handle: RePEc:gde:journl:gde_v64_n1_p93-132

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Related research

Keywords: household portfolio choice; information; privatizations;

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References

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  1. Pagano, Marco, 1986. "Endogenous Market Thinness and Stock Price Volatility," CEPR Discussion Papers 146, C.E.P.R. Discussion Papers.
  2. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  3. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
  4. Andersson, Björn, 2001. "Portfolio Allocation over the Life Cycle: Evidence from Swedish Household Data," Working Paper Series 2001:4, Uppsala University, Department of Economics.
  5. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  6. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  7. Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-29, September.
  8. Mervyn A. King & Jonathan I. Leape, 1987. "Asset Accumulation, Information, and the Life Cycle," NBER Working Papers 2392, National Bureau of Economic Research, Inc.
  9. Gabriella Chiesa & Giovanna Nicodano, 2003. "Privatization and Financial Market Development: Theoretical Issues," Working Papers 2003.1, Fondazione Eni Enrico Mattei.
  10. Andersson, B., 2001. "Portfolio Allocation Over the Life Cycle: Evidence from Swedish Household Data," Papers 2001:04, Uppsala - Working Paper Series.
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