Household stockholding in Europe: where do we stand and where do we go?[‘Limited market participation and volatility of assets prices’]

We discuss the current state of stockownership among households in major European countries, drawing parallels and contrasts with the US experience. Our analysis of detailed microeconomic data documents increasing stock market participation and persistent differences across countries in our sample: many more US, UK and Swedish households participate in the stock market than is the case in the Netherlands and, especially, in France, Germany, and Italy. At the individual household level, the data indicate that stock market participation correlates robustly with wealth and education, which have only small effects, however, on the asset share invested in stocks by households who do participate. These empirical results point to the relevance of participation costs, and we find that indicators of such costs are consistent with the observed pattern of participation across countries. Over time, higher participation was brought about by lower participation costs. We discuss the possible impact of market entry by households with different characteristics, and outline types of policies that could mitigate any undesirable stock market effects of cheaper and broader participation.— Luigi Guiso, Michael Haliassos and Tullio Jappelli