Stock market optimism and participation cost: a mean-variance estimation
We use household data to estimate the cost of participating to financial markets and the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, within which we derive structural decision rules for individual composition of the risky assets portfolio to be efficient, as function of both the amount to invest and the optimism about excess return of stocks over bonds. Exploiting the observed heterogeneity in risky asset holdings, we identify both the fixed cost of stock market participation and the dispersion of optimism about excess return. Using the Italian Survey of Household Income and Wealth we estimate a fixed cost of participating to the stock market of about 150 euro per year and a standard deviation of 30% in the optimism about excess return
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Monica Paiella, 2007.
"The Forgone Gains of Incomplete Portfolios,"
Review of Financial Studies,
Society for Financial Studies, vol. 20(5), pages 1623-1646, 2007 13.
- Monica Paiella, 2006. "The Foregone Gains of Incomplete Portfolios," CSEF Working Papers 156, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Monica Paiella, 2007. "The forgone gains of incomplete portfolios," Temi di discussione (Economic working papers) 625, Bank of Italy, Economic Research and International Relations Area.
- R. C. Merton, 1970.
"Optimum Consumption and Portfolio Rules in a Continuous-time Model,"
58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Merton, Robert C., 1971. "Optimum consumption and portfolio rules in a continuous-time model," Journal of Economic Theory, Elsevier, vol. 3(4), pages 373-413, December.
- Panetta, F. & Violi, R., 1999.
"Is there an Equity Premium Puzzle in Italy? A Look at Asset Returns, Consumption and Financial Structure Data Over the Last Century,"
353, Banca Italia - Servizio di Studi.
- Fabio Panetta & Roberto Violi, 1999. "Is there an Equity Premium Puzzle in Italy? A Look at Asset Returns, Consumption and Financial Structure Data over the Last Century," Temi di discussione (Economic working papers) 353, Bank of Italy, Economic Research and International Relations Area.
- Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-29, September.
- Attanasio, Orazio P., 1999. "Consumption," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 11, pages 741-812 Elsevier.
- Carol C. Bertaut, 1998. "Stockholding Behavior Of U.S. Households: Evidence From The 1983-1989 Survey Of Consumer Finances," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 263-275, May.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
When requesting a correction, please mention this item's handle: RePEc:ecm:latm04:239. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.