Trust, sociability and stock market participation
We investigate the effects of both trust and sociability for stock market participation, the role of which has been examined separately by existing finance literature. We use internationally comparable household data from the Survey of Health, Ageing and Retirement in Europe supplemented with regional information on generalized trust from the World Value Survey and on specific trust to financial institutions from Eurobarometer. We show that trust and sociability have distinct and sizeable positive effects on stock market participation and that sociability is likely to partly balance the discouragement effect on stockholding induced by low generalized trust in the region of residence. We also show that specific trust in advice given by financial institutions represents a prominent factor for stock investing, compared to other tangible features of the banking environment. Probing further into various groups of households, we find that sociability can induce stockholding among the less well off in Sweden, Denmark, and Switzerland where stock market participation is widespread. On the other hand, the effect of generalized trust is strong in countries with limited participation and low average trust like Austria, Spain, and Italy, offering an explanation for the remarkably low participation rates of the wealthy living therein.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: House of Finance, Grüneburgplatz 1, HPF H5, D-60323 Frankfurt am Main|
Phone: +49 (0)69 798-30050
Fax: +49 (0)69 798-30077
Web page: http://www.ifk-cfs.de/
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.:
- Durlauf, Steven N. & Fafchamps, Marcel, 2005.
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699
- Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," NBER Working Papers 10485, National Bureau of Economic Research, Inc.
- Steven Durlauf & Marcel Fafchamps, 2004. "Social Capital," Development and Comp Systems 0409060, EconWPA.
- Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," CSAE Working Paper Series 2004-14, Centre for the Study of African Economies, University of Oxford.
- Durlauf,S.N. & Fafchamps,M., 2004. "Social capital," Working papers 12, Wisconsin Madison - Social Systems.
- Marcel Fafchamps & Steven N. Durlauf, 2004. "Social Capital," Economics Series Working Papers WPS/2004-14, University of Oxford, Department of Economics.
- Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-29, September.
- Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005.
"Trusting the Stock Market,"
CEPR Discussion Papers
5288, C.E.P.R. Discussion Papers.
- Fehr, Ernst, 2008.
"On the Economics and Biology of Trust,"
IZA Discussion Papers
3895, Institute for the Study of Labor (IZA).
- Ernst Fehr, 2009. "On the economics and biology of trust," IEW - Working Papers 399, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr, 2008. "On the Economics and Biology of Trust," SOEPpapers on Multidisciplinary Panel Data Research 154, DIW Berlin, The German Socio-Economic Panel (SOEP).
- Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2006.
"Cognitive Abilities and Portfolio Choice,"
CEPR Discussion Papers
5735, C.E.P.R. Discussion Papers.
- Dimitrios Christelis & Tullio Jappelli & Mario Padula, 2006. "Cognitive Abilities and Portfolio Choice," CSEF Working Papers 157, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Dimitris Christelis & Tullio Jappelli & Mario Padula, 2008. "Cognitive Abilities and Portfolio Choice," Working Papers 2008_19, Department of Economics, University of Venice "Ca' Foscari".
- Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2008. "Cognitive abilities and portfolio choice," CFS Working Paper Series 2008/35, Center for Financial Studies (CFS).
- 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.
- 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.
- Guiso, Luigi & Jappelli, Tullio, 2004.
"Awareness and Stock Market Participation,"
CEPR Discussion Papers
4182, C.E.P.R. Discussion Papers.
- Luigi Guiso & Tullio Jappelli, 2005. "Awareness and Stock Market Participation," Review of Finance, Springer, vol. 9(4), pages 537-567, December.
- Luigi Guiso & Tullio Jappelli, 2005. "Awareness and Stock Market Participation," Review of Finance, European Finance Association, vol. 9(4), pages 537-567.
- Luigi Guiso & Tullio Jappelli, 2003. "Awareness and Stock Market Participation," CSEF Working Papers 110, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Jun 2004.
- Guiso, Luigi & Jappelli, Tullio, 2005. "Awareness and stock market participation," CFS Working Paper Series 2005/29, Center for Financial Studies (CFS).
- Rosen, H.S.Harvey S. & Wu, Stephen, 2004.
"Portfolio choice and health status,"
Journal of Financial Economics,
Elsevier, vol. 72(3), pages 457-484, June.
- Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
- Campbell, John, 2006.
3157877, Harvard University Department of Economics.
- Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2004.
"Social Interaction and Stock-Market Participation,"
Journal of Finance,
American Finance Association, vol. 59(1), pages 137-163, 02.
- Christelis, Dimitris & Georgarakos, Dimitris & Haliassos, Michael, 2008.
"Economic integration and mature portfolios,"
CFS Working Paper Series
2008/05, Center for Financial Studies (CFS).
When requesting a correction, please mention this item's handle: RePEc:zbw:cfswop:200929. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.