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The Effect of Education on Equity Holdings

  • Hryshko Dmytro

    ()

    (University of Alberta)

  • Luengo-Prado Maria

    ()

    (Northeastern University)

  • Sorensen Bent E.

    ()

    (University of Houston)

We study the effect of education on equity ownership in the form of stocks or mutual funds (outside of retirement accounts). We find a causal effect of education on stockholding using the number of colleges in the county where the respondent grew up as an instrument and data from the Panel Study of Income Dynamics. The effect is particularly strong for whites from non-privileged backgrounds. We explore the channels through which education affects equity holdings using the Wisconsin Longitudinal Survey and find that, controlling for family fixed effects, increased cognition and features associated with having a white collar job appear to be the main channels.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 12 (2012)
Issue (Month): 1 (March)
Pages: 1-41

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Handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:10
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  1. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2008. "Cognitive abilities and portfolio choice," CFS Working Paper Series 2008/35, Center for Financial Studies (CFS).
  2. Maarten van Rooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," CeRP Working Papers 66, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  3. Hansen, Karsten T. & Heckman, James J. & Mullen, K.J.Kathleen J., 2004. "The effect of schooling and ability on achievement test scores," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 39-98.
  4. Campbell, John, 2006. "Household Finance," Scholarly Articles 3157877, Harvard University Department of Economics.
  5. Charlotte Christiansen & Juanna Schröter Joensen & Jesper Rangvid, 2008. "Are Economists More Likely to Hold Stocks?," Review of Finance, European Finance Association, vol. 12(3), pages 465-496.
  6. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation And The Propensity To Plan," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1007-1047, August.
  7. Orazio Attanasio & James Banks & Sarah Tanner, 1998. "Asset holding and consumption volatility," IFS Working Papers W98/08, Institute for Fiscal Studies.
  8. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  9. Sule Alan, 2005. "Entry Costs and Stock Market Participation Over the Life Cycle," Working Papers 2005_1, York University, Department of Economics.
  10. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
  11. repec:use:tkiwps:2323 is not listed on IDEAS
  12. Perraudin, William R. M. & Sorensen, Bent E., 2000. "The demand for risky assets: Sample selection and household portfolios," Journal of Econometrics, Elsevier, vol. 97(1), pages 117-144, July.
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