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Temperance in Stock Market Participation: Evidence from France

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  • LUC ARRONDEL
  • HECTOR CALVO PARDO
  • XISCO OLIVER

Abstract

We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stock market, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Since recent extensions highlight the importance of the correlation between earnings and financial risks, here we use a self-assessed proxy from the DELTA-TNS 2002 cross-sectional survey to empirically assess the impact. Although income risk does not affect the participation decision of households' reporting a negative correlation, it does lower the participation of those who report a non-negative sign, consistent with economic theory predictions. Copyright (c) The London School of Economics and Political Science 2008.

Suggested Citation

  • Luc Arrondel & Hector Calvo Pardo & Xisco Oliver, 2010. "Temperance in Stock Market Participation: Evidence from France," Economica, London School of Economics and Political Science, vol. 77(306), pages 314-333, April.
  • Handle: RePEc:bla:econom:v:77:y:2010:i:306:p:314-333
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    Cited by:

    1. Guo, Xu & Wong, Wing-Keung & Zhu, Lixing, 2013. "Two-moment decision model for location-scale family with background asset," MPRA Paper 43864, University Library of Munich, Germany.
    2. Eichner, Thomas & Wagener, Andreas, 2012. "Tempering effects of (dependent) background risks: A mean-variance analysis of portfolio selection," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 422-430.
    3. Apergis, Nicholas, 2015. "Financial portfolio choice: Do business cycle regimes matter? Panel evidence from international household surveys," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 14-27.
    4. Brown, Sarah & Gray, Daniel & Harris, Mark N. & Spencer, Christopher, 2016. "Portfolio Allocation, Income Uncertainty and Households' Flight from Risk," IZA Discussion Papers 10408, Institute for the Study of Labor (IZA).
    5. Arrondel, Luc & Calvo-Pardo, Hector, 2014. "Endogenous non-tradable earnings and households’ demand for risky assets," Discussion Paper Series In Economics And Econometrics 1414, Economics Division, School of Social Sciences, University of Southampton.
    6. Harvey S. Rosen & Alexander J. W. Sappington, 2015. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," NBER Working Papers 21271, National Bureau of Economic Research, Inc.
    7. Harvey S. Rosen & Alexander J.W. Sappington, 2015. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," Working Papers 244, Princeton University, Department of Economics, Center for Economic Policy Studies..
    8. Harvey S. Rosen & Alexander J. W. Sappington, 2016. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," Education Finance and Policy, MIT Press, vol. 11(4), pages 404-425, Fall.
    9. Arrondel, L. & Savignac, F., 2009. "Stockholding: Does housing wealth matter?," Working papers 266, Banque de France.

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