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Equity Culture and the Distribution of Wealth

Author

Listed:
  • Michael Haliassos

    (Goethe University Frankfurt, CFS, MEA)

  • Dimitris Georgarakos

    (Goethe University Frankfurt and CFS)

  • Yiannis Bilias

    (University of Cyprus and CFS)

Abstract

Theory often suggests that wider household participation in stockholding reduces wealth inequality by expanding access. Empirical participation literature raises concerns that newcomers may be less educated, less sophisticated, and poorer. We use SCF data to decompose changes in wealth inequality between 1989 and 2001, through a stock market boom and a downturn. Equity wealth inequality is important for net wealth inequality, despite equity’s limited share. The relation between increased participation, net wealth inequality, and composition of the stockholder pool differs considerably between boom and downturn: inequality rose during the boom and fell during the downturn. When we distinguish changes in configuration of the stockholder pool from changes in the influence of given characteristics, our estimates imply that the 1989 and the 2001 stockholder pools would have produced higher equity holdings in 1998 than actually observed for 1998 stockholders. This arises from differences both in optimal holdings and in financial attitudes and practices, suggesting a dilution effect of the boom followed by a cleansing effect of the downturn. The incidence of cumulative gains and losses in stockholding is significantly influenced by investment horizon and portfolio breadth but, controlling for those, use of professional advice is either insignificant or counterproductive

Suggested Citation

  • Michael Haliassos & Dimitris Georgarakos & Yiannis Bilias, 2006. "Equity Culture and the Distribution of Wealth," Computing in Economics and Finance 2006 27, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:27
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    References listed on IDEAS

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    Cited by:

    1. Hackethal, Andreas & Haliassos, Michael & Jappelli, Tullio, 2012. "Financial advisors: A case of babysitters?," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 509-524.
    2. Ilias Georgakopoulos, 2019. "Income and Wealth Inequality in Malta," International Journal of Social Science Studies, Redfame publishing, vol. 7(5), pages 58-71, September.
    3. Dimitris Christelis & Dimitris Georgarakos & Michael Haliassos, 2013. "Differences in Portfolios across Countries: Economic Environment versus Household Characteristics," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 220-236, March.
    4. Yannis Bilias & Dimitris Georgarakos & Michael Haliassos, 2010. "Portfolio Inertia and Stock Market Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(4), pages 715-742, June.
    5. Dimitrios Christelis & Dimitris Georgarakos & Michael Haliassos, 2008. "Economic Integration and Mature Portfolios," CSEF Working Papers 194, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 23 Jan 2013.
    6. Michael, Bryane & Hartwell, Christopher A. & Ho, Gary, 2013. "Does Financial Market Development Explain (or at Least Predict) the Demand for Wealth Management and Private Banking Services in Developing Markets?," EconStor Preprints 109960, ZBW - Leibniz Information Centre for Economics.
    7. Peter Lindner, 2015. "Factor decomposition of the wealth distribution in the euro area," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(2), pages 291-322, May.
    8. Christelis, Dimitris & Georgarakos, Dimitris & Haliassos, Michael, 2011. "Stockholding: Participation, location, and spillovers," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1918-1930, August.
    9. repec:zbw:cfswop:wp200904 is not listed on IDEAS
    10. Luik, Marc-André & Berlemann, Michael, 2014. "Institutional Reform and Depositors’ Portfolio Choice: Evidence from Censored Quantile Regressions," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100291, Verein für Socialpolitik / German Economic Association.
    11. Christelis, Dimitris & Georgarakos, Dimitris, 2013. "Investing at home and abroad: Different costs, different people?," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 2069-2086.

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    More about this item

    Keywords

    Wealth distribution; inequality; stockholding; equity culture;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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