IDEAS home Printed from https://ideas.repec.org/a/taf/glecrv/v48y2019i4p396-418.html
   My bibliography  Save this article

Household’s Happiness and Financial Market Participation

Author

Listed:
  • Wei Cui
  • Insook Cho

Abstract

Using the 2014 China Family Panel Studies, this study examines the impact of household’s subjective well-being on financial decision. It investigates whether happiness affects household’s decision to participate in risky financial market. This study finds a non-linear relationship between happiness and the probability of financial market participation. The probability of risky financial market participation increases as self-reported happiness measure increases. However, the probability declines slightly at the highest level of self-reported happiness measure. In order to address a potential endogeneity problem, this study uses the Two Stage Least Squaredmodel with two sets of instrumental variables. These findings provide a strong support for the hypothesis that a person’s subjective well-being is one of the major determinants of household’s economic behaviours, and provide an important implication on household portfolio research.

Suggested Citation

  • Wei Cui & Insook Cho, 2019. "Household’s Happiness and Financial Market Participation," Global Economic Review, Taylor & Francis Journals, vol. 48(4), pages 396-418, October.
    • Handle: RePEc:taf:glecrv:v:48:y:2019:i:4:p:396-418
    DOI: 10.1080/1226508X.2019.1640629
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1226508X.2019.1640629
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1226508X.2019.1640629?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Guan-Chun Liu & Chien-Chiang Lee & Lei He, 2016. "The Synergistic Effects Between Insurance and Credit Markets on Economic Growth: Evidence from China," Global Economic Review, Taylor & Francis Journals, vol. 45(1), pages 1-18, March.
    2. Freeman, Richard B, 1978. "Job Satisfaction as an Economic Variable," American Economic Review, American Economic Association, vol. 68(2), pages 135-141, May.
    3. Cardak, Buly A. & Wilkins, Roger, 2009. "The determinants of household risky asset holdings: Australian evidence on background risk and other factors," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 850-860, May.
    4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    5. Drichoutis, Andreas C. & Nayga, Rodolfo M., 2013. "Eliciting risk and time preferences under induced mood states," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 45(C), pages 18-27.
    6. Paul Willen & Felix Kubler, 2006. "Collateralized Borrowing and Life-Cycle Portfolio Choice," NBER Working Papers 12309, National Bureau of Economic Research, Inc.
    7. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
    8. Stutzer, Alois & Frey, Bruno S., 2006. "Does marriage make people happy, or do happy people get married?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(2), pages 326-347, April.
    9. Navaz Naghavi & Wee-Yeap Lau, 2016. "Financial Liberalization and Stock Market Efficiency: Causality Analysis of Emerging Markets," Global Economic Review, Taylor & Francis Journals, vol. 45(4), pages 359-379, October.
    10. KNIGHT, John & SONG, Lina & GUNATILAKA, Ramani, 2009. "Subjective well-being and its determinants in rural China," China Economic Review, Elsevier, vol. 20(4), pages 635-649, December.
    11. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
    12. Cryder, Cynthia E. & Lerner, Jennifer & Gross, James J. & Dahl, Ronald E., 2008. "Misery Is Not Miserly," Scholarly Articles 37093805, Harvard Kennedy School of Government.
    13. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-172, March.
    14. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March.
    15. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," The Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
    16. Benjamin Hermalin & Alice Isen, 2008. "A model of the effect of affect on economic decision making," Quantitative Marketing and Economics (QME), Springer, vol. 6(1), pages 17-40, March.
    17. Stillman, Tyler F. & Fincham, Frank D. & Vohs, Kathleen D. & Lambert, Nathaniel M. & Phillips, Christa A., 2012. "The material and immaterial in conflict: Spirituality reduces conspicuous consumption," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 1-7.
    18. LuisM. Viceira & John Y. Campbell, 2001. "Who Should Buy Long-Term Bonds?," American Economic Review, American Economic Association, vol. 91(1), pages 99-127, March.
    19. Mitrut, Andreea & Wolff, François-Charles, 2011. "Do private and public transfers received affect life satisfaction? Evidence from Romania," Journal of Economic Psychology, Elsevier, vol. 32(6), pages 969-979.
    20. Bruno S. Frey, 2018. "Economics of Happiness," SpringerBriefs in Economics, Springer, number 978-3-319-75807-7, April.
    21. Bruno S. Frey & Alois Stutzer, 2002. "What Can Economists Learn from Happiness Research?," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 402-435, June.
    22. Dimitris Georgarakos & Giacomo Pasini, 2011. "Trust, Sociability, and Stock Market Participation," Review of Finance, European Finance Association, vol. 15(4), pages 693-725.
    23. Brown, Sarah & Roberts, Jennifer & Taylor, Karl, 2011. "The gender reservation wage gap: Evidence from British Panel data," Economics Letters, Elsevier, vol. 113(1), pages 88-91, October.
    24. John Ifcher & Homa Zarghamee, 2011. "Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment," American Economic Review, American Economic Association, vol. 101(7), pages 3109-3129, December.
    25. Delis, Manthos D. & Mylonidis, Nikolaos, 2015. "Trust, happiness, and households’ financial decisions," Journal of Financial Stability, Elsevier, vol. 20(C), pages 82-92.
    26. Brown, Sarah & Taylor, Karl, 2010. "Social Interaction and Stock Market Participation: Evidence from British Panel Data," IZA Discussion Papers 4886, Institute of Labor Economics (IZA).
    27. Rosen, H.S.Harvey S. & Wu, Stephen, 2004. "Portfolio choice and health status," Journal of Financial Economics, Elsevier, vol. 72(3), pages 457-484, June.
    28. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    29. van Winden, Frans & Krawczyk, Michal & Hopfensitz, Astrid, 2011. "Investment, resolution of risk, and the role of affect," Journal of Economic Psychology, Elsevier, vol. 32(6), pages 918-939.
    30. repec:bla:jfinan:v:59:y:2004:i:1:p:137-163 is not listed on IDEAS
    31. Dan Lee & Kap-Young Jeong & Sean Chae, 2011. "Measuring Social Capital in East Asia and Other World Regions: Index of Social Capital for 72 Countries," Global Economic Review, Taylor & Francis Journals, vol. 40(4), pages 385-407, December.
    32. Guven, Cahit, 2012. "Reversing the question: Does happiness affect consumption and savings behavior?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 701-717.
    33. Cahit Guven, 2011. "Are Happier People Better Citizens?," Kyklos, Wiley Blackwell, vol. 64(2), pages 178-192, May.
    34. Kaplanski, Guy & Levy, Haim & Veld, Chris & Veld-Merkoulova, Yulia, 2015. "Do Happy People Make Optimistic Investors?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(1-2), pages 145-168, April.
    35. Charles Kenny, 1999. "Does Growth Cause Happiness, or Does Happiness Cause Growth?," Kyklos, Wiley Blackwell, vol. 52(1), pages 3-25, February.
    36. Weng Chang Lee & Siong Hook Law, 2017. "Roles of Formal Institutions and Social Capital in Innovation Activities: A Cross-Country Analysis," Global Economic Review, Taylor & Francis Journals, vol. 46(3), pages 203-231, July.
    37. Fan, Elliott & Zhao, Ruoyun, 2009. "Health status and portfolio choice: Causality or heterogeneity?," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1079-1088, June.
    38. Tobin, James, 1982. "Asset Accumulation and Economic Activity," University of Chicago Press Economics Books, University of Chicago Press, number 9780226805023, December.
    39. Annette Vissing-Jorgensen, 2004. "Perspectives on Behavioral Finance: Does "Irrationality" Disappear with Wealth? Evidence from Expectations and Actions," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 139-208, National Bureau of Economic Research, Inc.
    40. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
    41. Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," The Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.
    42. Brian M. Lucey & Michael Dowling, 2005. "The Role of Feelings in Investor Decision‐Making," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 211-237, April.
    43. Winkelmann, Rainer, 2012. "Conspicuous consumption and satisfaction," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 183-191.
    44. Helena Chuliá & Andrés D. Pinchao & Jorge M. Uribe, 2018. "Risk Synchronization in International Stock Markets," Global Economic Review, Taylor & Francis Journals, vol. 47(2), pages 135-150, April.
    45. Shim, Soyeon & Serido, Joyce & Tang, Chuanyi, 2012. "The ant and the grasshopper revisited: The present psychological benefits of saving and future oriented financial behaviors," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 155-165.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xu, Ziyao & Ma, Junfeng & Li, Donghui & Fu, Wentao, 2022. "Religious beliefs and stock market participation: Evidence from urban households in China," Research in International Business and Finance, Elsevier, vol. 63(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yulei Rao & Lixing Mei & Rui Zhu, 2016. "Happiness and Stock-Market Participation: Empirical Evidence from China," Journal of Happiness Studies, Springer, vol. 17(1), pages 271-293, February.
    2. Guven, Cahit, 2012. "Reversing the question: Does happiness affect consumption and savings behavior?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 701-717.
    3. Nicholas Apergis & Tasawar Hayat & Tareq Saeed, 2019. "The Role of Happiness in Financial Decisions: Evidence from Financial Portfolio Choice and Five European Countries," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 343-360, September.
    4. Lu, Xiaomeng & Guo, Jiaojiao & Gan, Li, 2020. "International comparison of household asset allocation: Micro-evidence from cross-country comparisons," Emerging Markets Review, Elsevier, vol. 43(C).
    5. Delis, Manthos D. & Mylonidis, Nikolaos, 2015. "Trust, happiness, and households’ financial decisions," Journal of Financial Stability, Elsevier, vol. 20(C), pages 82-92.
    6. Kaustia, Markku & Conlin, Andrew & Luotonen, Niilo, 2023. "What drives stock market participation? The role of institutional, traditional, and behavioral factors," Journal of Banking & Finance, Elsevier, vol. 148(C).
    7. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    8. Wen, Chufu & Zhao, Xinyu & Xu, Longhao & Yin, Hua, 2023. "Military experience and household stock market participation: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).
    9. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    10. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2010. "Cognitive abilities and portfolio choice," European Economic Review, Elsevier, vol. 54(1), pages 18-38, January.
    11. Zou, Jing & Deng, Xiaojun, 2019. "Financial literacy, housing value and household financial market participation: Evidence from urban China," China Economic Review, Elsevier, vol. 55(C), pages 52-66.
    12. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, vol. 61(4), pages 1553-1604, August.
    13. Luik, Marc-André & Berlemann, Michael, 2014. "Institutional Reform and Depositors’ Portfolio Choice: Evidence from Censored Quantile Regressions," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100291, Verein für Socialpolitik / German Economic Association.
    14. Krause, Annabelle, 2013. "Don’t worry, be happy? Happiness and reemployment," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 1-20.
    15. Li, Jianjun & Li, Qize & Wei, Xu, 2020. "Financial literacy, household portfolio choice and investment return," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    16. Zhongkun Zhu & Wanglin Ma & Chenxin Leng & Peng Nie, 2021. "The Relationship Between Happiness and Consumption Expenditure: Evidence from Rural China," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 16(4), pages 1587-1611, August.
    17. Bruno S. Frey & Anthony Gullo, 2021. "Does Sports Make People Happier, or Do Happy People More Sports?," Journal of Sports Economics, , vol. 22(4), pages 432-458, May.
    18. Briggs, Joseph & Cesarini, David & Lindqvist, Erik & Östling, Robert, 2021. "Windfall gains and stock market participation," Journal of Financial Economics, Elsevier, vol. 139(1), pages 57-83.
    19. Mylonidis, Nikolaos & Chletsos, Michael & Barbagianni, Vanessa, 2019. "Financial exclusion in the USA: Looking beyond demographics," Journal of Financial Stability, Elsevier, vol. 40(C), pages 144-158.
    20. Khadija Shams & Alexander Kadow, 2019. "The Relationship Between Subjective Well-Being and Work–Life Balance Among Labourers in Pakistan," Journal of Family and Economic Issues, Springer, vol. 40(4), pages 681-690, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:glecrv:v:48:y:2019:i:4:p:396-418. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RGER20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.