Participation Constraints in the Stock Market Evidence from Unexpected Inheritance due to Sudden Death
AbstractWe use a natural experiment to investigate the impact of participation constraints on individuals' decisions to invest in the stock market. Unexpected inheritance due to sudden deaths results in exogenous variation in financial wealth and allows us to examine whether fixed entry and ongoing participation costs cause non-participation. We have three key findings. First, windfall wealth has a positive effect on participation. Second, the majority of households do not react to sizeable windfalls by entering the stock market, but hold on to substantial safe assets—even over longer horizons. Third, the majority of households inheriting stock holdings actively sell the entire portfolio. Overall, these findings suggest that participation by many individuals is unlikely to be constrained by financial participation costs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 03-2010.
Length: 43 pages
Date of creation: 01 Mar 2010
Date of revision:
Contact details of provider:
Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 26 65
Web page: http://www.cbs.dk/departments/econ/
More information through EDIRC
Stock Market Participation; Household Finance; Portfolio Choice; Sudden Death; Inheritance.;
Other versions of this item:
- Steffen Andersen & Kasper Meisner Nielsen, 2011. "Participation Constraints in the Stock Market: Evidence from Unexpected Inheritance Due to Sudden Death," Review of Financial Studies, Society for Financial Studies, vol. 24(5), pages 1667-1697.
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Andersen, Steffen & Nielsen, Kasper Meisner, 2012.
"Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment,"
03-2012, Copenhagen Business School, Department of Economics.
- Steffen Andersen & Kasper Meisner Nielsen, 2012. "Ability or Finances as Constraints on Entrepreneurship? Evidence from Survival Rates in a Natural Experiment," Review of Financial Studies, Society for Financial Studies, vol. 25(12), pages 3684-3710.
- Khorunzhina, Natalia, 2011. "Dynamic Stock Market Participation of Households," MPRA Paper 35310, University Library of Munich, Germany.
- Bucher-Koenen, Tabea & Ziegelmeyer, Michael, 2011.
"Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis,"
MEA discussion paper series
11234, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Bucher-Koenen, Tabea & Ziegelmeyer, Michael, 2011. "Who lost the most? Financial literacy, cognitive abilities, and the financial crisis," Working Paper Series 1299, European Central Bank.
- Tabea Bucher-Koenen & Michael Ziegelmeyer, 2011. "Who lost the most? Financial Literacy, Cognitive Abilities, and the Financial Crisis," BCL working papers 54, Central Bank of Luxembourg.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lars Nondal).
If references are entirely missing, you can add them using this form.