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Stock Market Participation: The Role Of Human Capital

Author

Listed:
  • Kartik Athreya

    (Federal Reserve Bank Richmond)

  • Felicia Ionescu

    (Federal Reserve Board)

  • Urvi Neelakantan

    (Centre for Advanced Financial Research and Learning (CAFRAL))

Abstract

Human capital investment is significant for most individuals, while stock market participation is limited, especially early in life. Returns to human capital depend on individual traits and will, for some, dominate returns to stocks. We demonstrate that heterogeneity in human capital returns, when empirically disciplined, explains well why many do not invest in stocks, especially when young. Our results also suggest that it is short sales constraints on stocks, and not borrowing constraints, that limit engagement with the stock market.

Suggested Citation

  • Kartik Athreya & Felicia Ionescu & Urvi Neelakantan, 2018. "Stock Market Participation: The Role Of Human Capital," Working Papers 022316, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:022316
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    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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