Market Participation and Dividend Clienteles

Abstract:     
Asset allocation and market participation are intimately related investment decisions. Studies of dividend clienteles attribute the positive relation between age and dividends partially to lack of self-control, but consumers with self-control problems are precisely those less likely to hold securities. Using data from the Consumer Expenditure Survey (CEX), I model market participation and dividend preferences jointly and find evidence of self-selection bias in traditional regressions linking dividend preferences to investors' demographics. Moreover, the positive relation between dividends and age is more likely due to life-cycle considerations rather than to lack of self-control.

Number of Pages in PDF File: 28

Keywords: market participation, dividend clienteles, self-control, CEX

JEL Classification: G10, G19

working papers series