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Limited Stock Market Participation Among Renters and Home Owners

Author

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  • Roine Vestman

    (Stockholm University and SIFR)

Abstract

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.

Suggested Citation

  • Roine Vestman, 2013. "Limited Stock Market Participation Among Renters and Home Owners," 2013 Meeting Papers 549, Society for Economic Dynamics.
  • Handle: RePEc:red:sed013:549
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    File URL: https://economicdynamics.org/meetpapers/2013/paper_549.pdf
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    References listed on IDEAS

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    1. repec:wsi:qjfxxx:v:03:y:2013:i:03n04:n:s2010139213500110 is not listed on IDEAS
    2. 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, August.
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    11. 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.
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    Cited by:

    1. Almenberg, Johan & Dreber, Anna, 2015. "Gender, stock market participation and financial literacy," Economics Letters, Elsevier, vol. 137(C), pages 140-142.
    2. Ashok Thomas & Luca Spataro, 2015. "Financial Literacy, Human Capital and Stock Market Participation in Europe: An Empirical Exercise under Endogenous Framework," Discussion Papers 2015/194, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Robert Östling & Erik Lindqvist & David Cesarini & Joseph Briggs, 2016. "Wealth, Portfolio Allocations, and Risk Preference," 2016 Meeting Papers 1089, Society for Economic Dynamics.
    4. Joseph S. Briggs & David Cesarini & Erik Lindqvist & Robert Östling, 2015. "Windfall Gains and Stock Market Participation," NBER Working Papers 21673, National Bureau of Economic Research, Inc.
    5. 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.
    6. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, Elsevier.

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