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Afraid of the stock market

Author

Listed:
  • Yuree Lim

    (University of Wisconsin-La Crosse)

  • Kyoung Tae Kim

    (University of Alabama)

Abstract

This study demonstrates the way investors psychological traits influence their financial behaviors in the stock market. Results from the Health and Retirement Study show that anxious individuals are reluctant to participate in the stock market and have a lower level of risky investments. Anxiety’s effect is more pronounced for less educated investors, implying that anxiety about the unknown stock market drives this effect. Analysis of individual traumatic experiences as instruments for the current anxiety level suggests a causal effect of anxiety on investment decisions.

Suggested Citation

  • Yuree Lim & Kyoung Tae Kim, 2019. "Afraid of the stock market," Review of Quantitative Finance and Accounting, Springer, vol. 53(3), pages 773-810, October.
    • Handle: RePEc:kap:rqfnac:v:53:y:2019:i:3:d:10.1007_s11156-018-0766-x
    DOI: 10.1007/s11156-018-0766-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Anxiety; Stock market participation; Investment decision; Asset allocation;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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