Trust, Sociability and Stock Market Participation
50 Pages Posted: 2 May 2009 Last revised: 2 May 2012
Date Written: August 1, 2011
This paper investigates the importance of both trust and sociability for stock market participation and for differences in stockholding across Europe. We estimate significant effects for the two, and find that sociability can partly balance the discouragement effect on stockholding induced by low regional prevailing trust. We test for exogeneity of trust and sociability indicators using variation in history of political institutions and in frequency of contacts with grandchildren, respectively. Moreover, the effect of trust is stronger in countries with limited participation and low average trust, offering an explanation for the remarkably low stockholding rates of the wealthy living therein.
Keywords: Trust, sociability, household finance, stockholding
JEL Classification: A13, D12, D8, G11
Suggested Citation: Suggested Citation