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Happiness and stock market participation

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  • Wenyan, Huang

Abstract

This study investigates the underexplored relationship between stock market participation and household happiness by analyzing microdata from the China Household Finance Survey (CHFS 2013, 2015, 2017). Our findings reveal a robust inverted U-shaped relationship between happiness and stock market participation, offering novel resolutions to three persistent puzzles in behavioral finance: the stock market participation puzzle, the happiness-income paradox, and the interplay between happiness and risk. Mechanism analysis further uncovers the multidimensional moderating role of risk through perceived risk, risk identification (social interaction, financial interest, and financial literacy), and background risk (urban–rural disparities and health status). The perceived risk significantly moderates the relationship between happiness and stock market participation. Risk identification factors operate distinctively with social interaction, amplify participation for moderately happy households, financial interest modulates participation nonlinearly, and financial literacy affects portfolio diversification. Background risks moderate the relationship between happiness and participation decisions and depth. These results provide critical empirical foundations for designing targeted financial policies that address heterogeneity in household risk dynamics and psychological well-being.

Suggested Citation

  • Wenyan, Huang, 2025. "Happiness and stock market participation," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:ecofin:v:80:y:2025:i:c:s1062940825001317
    DOI: 10.1016/j.najef.2025.102491
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