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Limited Stock Market Participation Among Renters and Home OwnersRoine VestmanStockholm University - Department of Economics; Stockholm Institute for Financial Research (SIFR) June 11, 2012 Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper Abstract: Home owners are about twice as likely as renters to participate in the stock market, both in the USA and Sweden. This paper sets up a life-cycle portfolio choice model which generates this pattern of limited stock market participation. Calibrated to Swedish data, the model generates the stock market participation rate of home owners as well as the much lower participation rate of renters. In addition, the model replicates two salient features of the data. First, it replicates the U-shaped life-cycle profile of stock market participation among renters, which is due to sorting. Second, the crowding-out mechanism that leads to limited participation among home owners in the model is consistent with difference-in-difference regressions on a high-quality Swedish panel data set.
Number of Pages in PDF File: 57 Keywords: Limited Participation, Home Ownership, Household Finance JEL Classification: G11, E44, D91, E21 working papers seriesDate posted: June 12, 2012Suggested CitationContact Information
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