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Title:
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Participation Constraints in the Stock Market
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Evidence from Unexpected Inheritance due to Sudden Death |
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Author:
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Andersen, Steffen; Meisner Nielsen, Kasper |
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Abstract:
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We use a natural experiment to investigate the impact of participation
constraints on individuals' decisions to invest in the stock market. Unexpected inheritance
due to sudden deaths results in exogenous variation in financial wealth and allows us to
examine whether fixed entry and ongoing participation costs cause non-participation. We
have three key findings. First, windfall wealth has a positive effect on participation.
Second, the majority of households do not react to sizeable windfalls by entering the
stock market, but hold on to substantial safe assets—even over longer horizons. Third,
the majority of households inheriting stock holdings actively sell the entire portfolio.
Overall, these findings suggest that participation by many individuals is unlikely to be
constrained by financial participation costs. |
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URI:
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http://hdl.handle.net/10398/8169
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Date:
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2010-09-22 |
This work is licensed under a Creative Commons License.
