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Limited Stock Market Participation Among Renters and Home Owners

  • Roine Vestman

    (Stockholm University and SIFR)

Home owners are about twice as likely as renters to participate in the stock market, both in the USA and Sweden. This paper sets up a life-cycle portfolio choice model which generates this pattern of limited stock market participation. Calibrated to Swedish data, the model generates the stock market participation rate of home owners as well as the much lower participation rate of renters. In addition, the model replicates two salient features of the data. First, it replicates the U-shaped life-cycle profile of stock market participation among renters, which is due to sorting. Second, the crowding-out mechanism that leads to limited participation among home owners in the model is consistent with difference-in-difference regressions on a high-quality Swedish panel data set.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 549.

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Date of creation: 2013
Date of revision:
Handle: RePEc:red:sed013:549
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. Sanford J Grossman & Guy Laroque, 2003. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Levine's Working Paper Archive 618897000000000803, David K. Levine.
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  7. Erik Lindqvist & Roine Vestman, 2011. "The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 101-28, January.
  8. Marjorie Flavin & Shinobu Nakagawa, 2008. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence," American Economic Review, American Economic Association, vol. 98(1), pages 474-95, March.
  9. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2006. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes," NBER Working Papers 12030, National Bureau of Economic Research, Inc.
  10. Fatih Guvenen, 2009. "A Parsimonious Macroeconomic Model for Asset Pricing," NBER Working Papers 15243, National Bureau of Economic Research, Inc.
  11. Jonas D. M. Fisher & Martin Gervais, 2011. "Why Has Home Ownership Fallen Among The Young?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 883-912, 08.
  12. Francisco Gomes & Alexander Michaelides & Valery Polkovnichenko, 2009. "Optimal Savings with Taxable and Tax-Deferred Accounts," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 718-735, October.
  13. Ralph Koijen & Stijn Van Nieuwerburgh & Roine Vestman, 2014. "Judging the Quality of Survey Data by Comparison with "Truth" as Measured by Administrative Records: Evidence From Sweden," NBER Chapters, in: Improving the Measurement of Consumer Expenditures, pages 308-346 National Bureau of Economic Research, Inc.
  14. Motohiro Yogo, 2006. "A Consumption-Based Explanation of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 61(2), pages 539-580, 04.
  15. Lu Han, 2010. "The Effects of Price Risk on Housing Demand: Empirical Evidence from U.S. Markets," Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 3889-3928, November.
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