Awareness and Stock Market Participation
AbstractThe extent to which consumers are aware of available financial assets depends on the incentives of asset suppliers to spread information about the instruments they issue. We propose a theoretical framework in which the amount of information disseminated and the probability of individuals becoming aware of financial assets are correlated with the probability that, once informed, they will invest in the asset and negatively affected by the cost of spreading information. Social learning is a further channel through which potential investors may come to be informed about existing assets. While social learning may limit the production of financial information by assets suppliers, it increases the probability that individuals become financially aware. These predictions are supported by data on awareness of financial assets available in the 1995 and 1998 waves of the Italian Survey of Household Income and Wealth. Lack of financial awareness has important implications for understanding the stockholding puzzle and for estimating stock market participation costs.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 110.
Date of creation: 01 Nov 2003
Date of revision: 01 Jun 2004
Publication status: Published in Review of Finance, December 2005, vol. 9, issue 4, pages 537-567
financial information; portfolio choice;
Other versions of this item:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G1 - Financial Economics - - General Financial Markets
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