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Equity Culture and the Distribution of Wealth

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  • Michael Haliassos

    ()
    (Goethe University Frankfurt, CFS, MEA)

  • Dimitris Georgarakos

    (Goethe University Frankfurt and CFS)

  • Yiannis Bilias

    (University of Cyprus and CFS)

Abstract

Theory often suggests that wider household participation in stockholding reduces wealth inequality by expanding access. Empirical participation literature raises concerns that newcomers may be less educated, less sophisticated, and poorer. We use SCF data to decompose changes in wealth inequality between 1989 and 2001, through a stock market boom and a downturn. Equity wealth inequality is important for net wealth inequality, despite equity’s limited share. The relation between increased participation, net wealth inequality, and composition of the stockholder pool differs considerably between boom and downturn: inequality rose during the boom and fell during the downturn. When we distinguish changes in configuration of the stockholder pool from changes in the influence of given characteristics, our estimates imply that the 1989 and the 2001 stockholder pools would have produced higher equity holdings in 1998 than actually observed for 1998 stockholders. This arises from differences both in optimal holdings and in financial attitudes and practices, suggesting a dilution effect of the boom followed by a cleansing effect of the downturn. The incidence of cumulative gains and losses in stockholding is significantly influenced by investment horizon and portfolio breadth but, controlling for those, use of professional advice is either insignificant or counterproductive

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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 27.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:27

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Keywords: Wealth distribution; inequality; stockholding; equity culture;

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References

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Citations

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Cited by:
  1. Christelis, Dimitris & Georgarakos, Dimitris, 2013. "Investing at home and abroad: Different costs, different people?," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2069-2086.
  2. Bilias, Yannis & Georgarakos, Dimitris & Haliassos, Michael, 2006. "Portfolio inertia and stock market fluctuations," CFS Working Paper Series 2006/14, Center for Financial Studies (CFS).
  3. Christelis, Dimitris & Georgarakos, Dimitris & Haliassos, Michael, 2008. "Economic integration and mature portfolios," CFS Working Paper Series 2008/05, Center for Financial Studies (CFS).
  4. Hackethal, Andreas & Haliassos, Michalis & Jappelli, Tullio, 2009. "Financial Advisors: A Case of Babysitters?," CEPR Discussion Papers 7235, C.E.P.R. Discussion Papers.
  5. Christelis, Dimitris & Georgarakos, Dimitris & Haliassos, Michalis, 2010. "Differences in Portfolios across Countries: Economic Environment versus Household Characteristics," CEPR Discussion Papers 8017, C.E.P.R. Discussion Papers.

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