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The costs and beliefs impliedby direct stock ownership

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  • Barth, Daniel

Abstract

This paper develops a structural model of the costs and beliefs required to rationalize household direct stock ownership. In the model, households believe they can learn information about individual stock returns through costly research. The model provides a novel explanation for many empirical features of household portfolios. Further, the model identifies the distributions of both household research costs and household beliefs about the predictability of individual stock returns. Identification depends only on households JEL Classification: G02, G11

Suggested Citation

  • Barth, Daniel, 2014. "The costs and beliefs impliedby direct stock ownership," Working Paper Series 1657, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20141657
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    More about this item

    Keywords

    direct stock ownership; household beliefs; research costs; under-diversification;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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