Awareness and Stock Market Participation
The extent to which consumers are aware of available financial assets depends on the incentives of asset suppliers to spread information about the instruments they issue. We propose a theoretical framework in which the amount of information disseminated and the probability of individuals becoming aware of financial assets are correlated with the probability that, once informed, they will invest in the asset and negatively affected by the cost of spreading information. Social learning is a further channel through which potential investors may come to be informed about existing assets. While social learning may limit the production of financial information by assets suppliers, it increases the probability that individuals become financially aware. These predictions are supported by data on awareness of financial assets available in the 1995 and 1998 waves of the Italian Survey of Household Income and Wealth. Lack of financial awareness has important implications for understanding the stockholding puzzle and for estimating stock market participation costs.
|Date of creation:||01 Nov 2003|
|Date of revision:||01 Jun 2004|
|Publication status:||Published in Review of Finance, December 2005, vol. 9, issue 4, pages 537-567|
|Contact details of provider:|| Postal: |
Phone: +39 081 - 675372
Fax: +39 081 - 675372
Web page: http://www.csef.it/
More information through EDIRC
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.:
- Grossman, Sanford J & Stiglitz, Joseph E, 1980.
"On the Impossibility of Informationally Efficient Markets,"
American Economic Review,
American Economic Association, vol. 70(3), pages 393-408, June.
- Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
- Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000.
"The Role of Social Capital in Financial Development,"
CRSP working papers
511, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
- Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers 2383, C.E.P.R. Discussion Papers.
- Luigi Guiso & Paola Sapienza & Luigi Zingales, 2000. "The Role of Social Capital in Financial Development," NBER Working Papers 7563, National Bureau of Economic Research, Inc.
- Fatih Guvenen, 2005.
"Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective,"
- Guvenen, Fatih, 2006. "Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1451-1472, October.
- M. Fatih Guvenen, 2002. "Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective," RCER Working Papers 491, University of Rochester - Center for Economic Research (RCER), revised Mar 2003.
- Basak, Suleyman & Cuoco, Domenico, 1998. "An Equilibrium Model with Restricted Stock Market Participation," Review of Financial Studies, Society for Financial Studies, vol. 11(2), pages 309-41.
- Joao F. Cocco, 2005. "Consumption and Portfolio Choice over the Life Cycle," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 491-533.
- Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992.
"Labor supply flexibility and portfolio choice in a life cycle model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 16(3-4), pages 427-449.
- Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
- Joël Peress, 2004. "Wealth, Information Acquisition, and Portfolio Choice," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 879-914.
- Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1487-1519, August.
- Monica Paiella, 2001.
"Limited Financial Market Participation: A Transaction Cost-Based Explanation,"
Temi di discussione (Economic working papers)
415, Bank of Italy, Economic Research and International Relations Area.
- Monica Paiella, 2001. "Limited financial market participation: a transaction cost-based explanation," IFS Working Papers W01/06, Institute for Fiscal Studies.
- Luigi Guiso & Tullio Jappelli, 2002. "Stockholding in Italy," CSEF Working Papers 82, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Luigi Guiso & Tullio Jappelli, 2000.
"Household Portfolios in Italy,"
CSEF Working Papers
43, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Mervyn A. King & Jonathan I. Leape, 1987. "Asset Accumulation, Information, and the Life Cycle," NBER Working Papers 2392, National Bureau of Economic Research, Inc.
- Monica Paiella, 2004. "Heterogeneity in Financial Market Participation: Appraising its Implications for the C-CAPM," Review of Finance, Springer, vol. 8(3), pages 445-480.
- Casey B. Mulligan & Xavier Sala-i-Martin, 2000. "Extensive Margins and the Demand for Money at Low Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 961-991, October.
- Orazio Attanasio & James Banks & Sarah Tanner, 1998.
"Asset holding and consumption volatility,"
IFS Working Papers
W98/08, Institute for Fiscal Studies.
- Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2001.
"Social Interaction and Stock-Market Participation,"
NBER Working Papers
8358, National Bureau of Economic Research, Inc.
- Merton, Robert C, 1987.
" A Simple Model of Capital Market Equilibrium with Incomplete Information,"
Journal of Finance,
American Finance Association, vol. 42(3), pages 483-510, July.
- Merton, Robert C., 1987. "A simple model of capital market equilibrium with incomplete information," Working papers 1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Mark Grinblatt, 2001. "How Distance, Language, and Culture Influence Stockholdings and Trades," Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, 06.
- Verrecchia, Robert E, 1982. "Information Acquisition in a Noisy Rational Expectations Economy," Econometrica, Econometric Society, vol. 50(6), pages 1415-30, November.
- Duflo, Esther & Saez, Emmanuel, 2002.
"Participation and investment decisions in a retirement plan: the influence of colleagues' choices,"
Journal of Public Economics,
Elsevier, vol. 85(1), pages 121-148, July.
- Esther Duflo & Emmanuel Saez, 2000. "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices," NBER Working Papers 7735, National Bureau of Economic Research, Inc.
- 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.
- 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," Papers 353, Banca Italia - Servizio di Studi.
- Erzo G. J. Luttmer, 1999. "What Level of Fixed Costs Can Reconcile Consumption and Stock Returns?," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 969-997, October.
When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:110. 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: (Lia Ambrosio)
If references are entirely missing, you can add them using this form.