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Trust, Sociability, and Stock Market Participation

  • Dimitris Georgarakos
  • Giacomo Pasini

This article investigates the importance of both trust and sociability for stock market participation and for differences in stockholding across Europe. We estimate significant effects for the two, and find that sociability can partly balance the discouragement effect on stockholding induced by low regional prevailing trust. We test for exogeneity of trust and sociability indicators using variation in history of political institutions and in frequency of contacts with grandchildren, respectively. Moreover, the effect of trust is stronger in countries with limited participation and low average trust, offering an explanation for the remarkably low stockholding rates of the wealthy living therein. Copyright 2011, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/rof/rfr028
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Article provided by European Finance Association in its journal Review of Finance.

Volume (Year): 15 (2011)
Issue (Month): 4 ()
Pages: 693-725

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Handle: RePEc:oup:revfin:v:15:y:2011:i:4:p:693-725
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  10. Esther Duflo & Emmanuel Saez, 2000. "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices," NBER Working Papers 7735, National Bureau of Economic Research, Inc.
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