IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/v9y2019i1p30-41id1784.html
   My bibliography  Save this article

Household Leverage and Stock Market Investment Decisions

Author

Listed:
  • Pengfei Li
  • Zhengwei Wang

Abstract

Household leverage has significant influence on their stock market investment decisions, controlling for age, gender, wealth, income, education background, and financial experience. Using a unique survey data in China, we provide evidence that individuals with higher household leverage are less likely to participate on the stock market. However, for stock market participators, higher household leverage is associated with higher investment rate on stocks and mutual funds. We further examine the underlying mechanisms by financial constraint and risk aversion. Financial constraint cannot explain the effect of leverage on respondents’ stock market participation, but is a good moderator variable for the influence of leverage on participators’ stock investment rate. The enhancement effect of leverage on the stock investment rate is stronger for the stock market participators when they face less severe financial constraint. Risk preference can help explain the household leverage effect. The impediment effect of household leverage on stock market participation only works when they are strongly risk averse while the enhancement effect of household leverage on stock investment rate only works when participators are slightly risk averse.

Suggested Citation

  • Pengfei Li & Zhengwei Wang, 2019. "Household Leverage and Stock Market Investment Decisions," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(1), pages 30-41.
    • Handle: RePEc:asi:aeafrj:v:9:y:2019:i:1:p:30-41:id:1784
    as

    Download full text from publisher

    File URL: https://archive.aessweb.com/index.php/5002/article/view/1784/2671
    Download Restriction: no
    File URL: https://archive.aessweb.com/index.php/5002/article/view/1784/3924
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:v:9:y:2019:i:1:p:30-41:id:1784. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Robert Allen (email available below). General contact details of provider: https://archive.aessweb.com/index.php/5002/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.