Student Debt and Stock Market Participation

46 Pages Posted: 9 May 2016 Last revised: 2 Oct 2018

See all articles by Birzhan Batkeyev

Birzhan Batkeyev

International School of Economics - Kazakh-British Technical University

Karthik Krishnan

Northeastern University

Debarshi K. Nandy

Brandeis University - International Business School

Date Written: March 1, 2016

Abstract

Using household data from the Survey of Consumer Finances, we find that student debt negatively affects future investment in high return, risky financial assets, utilizing exogenous shocks to student loans and its bankruptcy treatment, to establish causation. We show that student loans negatively impact future portfolio risk-taking by students already in four-year colleges at the time of the regulatory changes that lead to these exogenous shocks. This negative relation gets stronger for financially constrained households. Our evidence indicates that student debt reduces early investment in high return assets, negatively affecting the long-term net-worth and wealth creation of households.

Keywords: Student debt, portfolio risk, Household Net Worth; Stock Market Participation

JEL Classification: G30, I22

Suggested Citation

Batkeyev, Birzhan and Krishnan, Karthik and Nandy, Debarshi K., Student Debt and Stock Market Participation (March 1, 2016). Northeastern U. D’Amore-McKim School of Business Research Paper No. 2777062. Available at SSRN: https://ssrn.com/abstract=2777062 or http://dx.doi.org/10.2139/ssrn.2777062

Birzhan Batkeyev

International School of Economics - Kazakh-British Technical University ( email )

Almaty, 050000
Kazakhstan

Karthik Krishnan (Contact Author)

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)

HOME PAGE: http://www.northeastern.edu/kkrishnan

Debarshi K. Nandy

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States

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