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Limited Stock Market Participation Among Renters and Home Owners

102 Pages Posted: 22 Mar 2010 Last revised: 28 Jan 2018

Roine Vestman

Stockholm University - Department of Economics; Swedish House of Finance

Date Written: January 27, 2018

Abstract

The stock market participation rate among homeowners is twice as high as among renters. This paper builds a life-cycle portfolio choice model with endogenous housing tenure choice. A stylized form of preference heterogeneity generates a substantial difference in participation rates. A majority of households have a large savings motive and choose to be homeowners and participate. A minority of households have a small savings motive and find it less worthwhile to participate. Fewer of these households become homeowners. Difference-in-difference regressions on panel data do not find evidence of a crowding out effect of homeownership on participation, supporting the message that preference heterogeneity matters.

Keywords: Limited Participation, Home Ownership, Household Finance

JEL Classification: G11, E44, D91, E21

Suggested Citation

Vestman, Roine, Limited Stock Market Participation Among Renters and Home Owners (January 27, 2018). Available at SSRN: https://ssrn.com/abstract=1573181 or http://dx.doi.org/10.2139/ssrn.1573181

Roine Vestman (Contact Author)

Stockholm University - Department of Economics ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden

HOME PAGE: http://www.ne.su.se/

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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