Household Stock Market Participation During the Great Financial Crisis

Using the Panel Study of Income Dynamics, this paper studies American households’ stock market participation in 2007–2009, a period that saw a major stock market downswing. After controlling for standard household characteristics, we estimate that the stock ownership in 2009 dropped 2.9 percentage points – a 5.9% decline – compared to that in 2007. We find evidence that less-educated households, poor households and households with heads belonging to a minority are more likely to drop out of the market after the market crash. We also compare the change in the stock ownership during the crisis period with other 2-year periods over 2003–2013.