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Political Uncertainty and Household Stock Market Participation

Author

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  • Agarwal, Vikas
  • Aslan, Hadiye
  • Huang, Lixin
  • Ren, Honglin

Abstract

Using microlevel panel data and a difference-in-differences identification strategy, we study the effect of political uncertainty on household stock market participation. We find that households significantly reduce their participation and reallocate funds to safer assets during periods of increased political uncertainty prior to gubernatorial elections. The decline in participation is related to households’ response to elevated asset risk and their incentive to hedge increased labor income risk. In situations where uncertainty remains high after elections, pre-election reduction in participation is only partially reversed.

Suggested Citation

  • Agarwal, Vikas & Aslan, Hadiye & Huang, Lixin & Ren, Honglin, 2022. "Political Uncertainty and Household Stock Market Participation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(8), pages 2899-2928, December.
    • Handle: RePEc:cup:jfinqa:v:57:y:2022:i:8:p:2899-2928_1
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    Cited by:

    1. Li, Jie & Li, Wenchao, 2025. "Retreating from risks: Household stock market participation in a protectionist era," Journal of Banking & Finance, Elsevier, vol. 172(C).
    2. Beatrice Bertelli & Marianna Brunetti & Costanza Torricelli & Mariangela Zoli, 2025. "From Knowledge to Allocation of Sustainable Assets: Results From An In-Field Survey In Italy," CEIS Research Paper 612, Tor Vergata University, CEIS, revised 07 Oct 2025.
    3. Ashton De Silva & Huu Nhan Duong & My Nguyen & Yen Ngoc Nguyen, 2023. "Bank risk in uncertain times: Do credit rationing and revenue diversification matter?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(7-8), pages 1240-1273, July.
    4. Liu, Jialin & Li, Lin & Lu, Dong & E., Meihe, 2025. "FinTech and consumption resilience to uncertainty shocks: Evidence from digital wealth management in China," China Economic Review, Elsevier, vol. 94(PC).
    5. Apergis, Nicholas, 2024. "COVID-19 and US females’ portfolio decisions," International Review of Economics & Finance, Elsevier, vol. 95(C).
    6. Fatima, Shumaila & Chakraborty, Madhumita, 2025. "Does mobile phone proficiency contribute to stock market participation? The role of payment convenience, liquidity, and social interaction," Economic Modelling, Elsevier, vol. 144(C).
    7. Meister, Lorenz & Menkhoff, Lukas & Schröder, Carsten, 2025. "Stock market participation, work from home, and inequality," International Review of Financial Analysis, Elsevier, vol. 107(C).
    8. Xu, Li & Zhao, Ningru & Zheng, Jin Di, 2025. "Religion, places of worship, and individual risk-taking in China," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    9. Zhang, Yan & Wang, Xiaoyang & Zhang, Wenwen, 2025. "The impacts of clan culture on private investment: Financing substitution and human capital accumulation," Journal of Asian Economics, Elsevier, vol. 97(C).
    10. Sha, Yezhou & Wang, Zilong & Yin, Zhichao, 2024. "House purchase restriction and stock market participation: Unveiling the role of nonpecuniary consideration," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 390-406.
    11. Gan, Hongwu & Guo, Mengmeng & Li, Jian & Niu, Geng & Zhou, Yang, 2025. "Air pollution and household stock market participation," Journal of Banking & Finance, Elsevier, vol. 172(C).
    12. Li, Yong & Mao, Kun & Gan, Hongwu & Zhou, Yang, 2025. "Climate risk and household stock market participation," China Economic Review, Elsevier, vol. 94(PC).
    13. Wang, Yibing & Driouchi, Tarik & Nguyen, Duc Duy (Louis), 2025. "Parental death in childhood and stock market participation: Cross-cultural insights," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    14. Jawadi, Fredj & Pondie, Thierry M., 2024. "Political uncertainty and macro-financial dynamics in the BRICS," International Economics, Elsevier, vol. 179(C).

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