This paper estimates the costs of participating to the stock market, together with the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, when there is a riskless asset (cash), which makes the allocation of the investment in risky assets (stocks and bonds) independent on preferences. Within this framework, we derive “structural” decision rules for the composition of the risky asset portfolio to be e¢cient. These rules depend on the amount invested in the risky portfolio and on investors' optimism, which are the determinants of the stock market return expected by a household, when participation involves a …xed cost. Using these rules and the heterogeneity in risky assets holdings and in the degree of optimism, we identify both the fixed costs of stock investment This paper estimates the costs of participating to the stock market, together with the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, when there is a riskless asset (cash), which makes the allocation of the investment in risky assets (stocks and bonds) independent on preferences. Within this framework, we derive “structural” decision rules for the composition of the risky asset portfolio to be e¢cient. These rules depend on the amount invested in the risky portfolio and on investors' optimism, which are the determinants of the stock market return expected by a household, when participation involves a …xed cost. Using these rules and the heterogeneity in risky assets holdings and in the degree of optimism, we identify both the fixed costs of stock investment
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number
040.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Attanasio, Orazio P., 1999.
"Consumption,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 11, pages 741-812
Elsevier.
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Haliassos, Michael & Bertaut, Carol C, 1995.
"Why Do So Few Hold Stocks?,"
Economic Journal,
Royal Economic Society, vol. 105(432), pages 1110-29, September.
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