Analysis of the Limited Household Participation in the Stock Market Phenomenon

Analysis of the Limited Household Participation in the Stock Market Phenomenon

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Contents
Summary 3
Situation analysis 3
Research on portfolio theory 4
Variables explaining stockholding 5
Factors for trying to explain the phenomenon 7
Conclusion 11
References 12


Summary
At the very basis of this paper is the analysis of the limited household stock market participation phenomenon. The relevance of the issue is discussed through the perspective of the theories of finance with special regard to the Model Portfolio Theory.
Given the point of view of one of the largest stock markets - the market of the United States of America - the phenomenon is first of all presented as deriving from behaviours related to stockholding. The attributes of a typical American stockholder are important to identify in order to make any further conclusions about the causes of the problem.
In later chapters the variables that are used in recent researches to try to explain the phenomenon are presented. Our paper discusses the background risks faced by households and financial literacy in more detail. These were chosen by our team as specifically relevant and probably part of the core causes of limited household stock market participation in the USA.
Situation analysis
It is known that a major number of households in the USA do not participate in the stock markets. If to look at the historical patterns of this phenomenon, according to panel study of income dynamics (PSID), which held a sample of 2998 families and was held in 1984, only small percentage of households owned stocks – 27.6% (Mankiw, Zeldes, 1991). For the families which had $100,000 or more liquid assets only 47.7% did own stocks (Mankiw, Zeldes, 1991). Recent studies have estimated that even during the 1990 when there was a major growth in U.S. stock mar...


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...mouth.edu/~alusardi/Papers/Nether/LiteracyPaper_Lusardi.pdf on 23 April 2014
The Federal Reserve Board. (2011). Limited Market Participation and Asset Prices in the Presence of Earnings Management. Retrieved from: http://www.federalreserve.gov/pubs/ifdp/2011/1019/ifdp1019.htm on 24 April 2014
Top Universities. (2012). How Much Does it Cost to Study in the US? Retrieved from: http://www.topuniversities.com/student-info/student-finance/how-much-does-it-cost-study-us on 23 April 2014
Wike, R., Holzwart, K. (2008). Where Trust is High, Crime and Corruption are Low. RewResearch Global Attitudes Project. Retrieved from: http://www.pewglobal.org/2008/04/15/where-trust-is-high-crime-and-corruption-are-low/ on 24 April 2014
World Stock Exchanges. (2012). List of stock exchanges around the world. Retrieved from: http://www.world-stock-exchanges.net/ on 23 April 2014


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