Do the Rich Get Richer in the Stock Market? Evidence from India

26 Pages Posted: 20 Mar 2018 Last revised: 16 Aug 2018

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Benjamin Ranish

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: July 31, 2018

Abstract

We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related to the prevalence of undiversified accounts that own relatively few stocks. First, some undiversified portfolios randomly do well, while others randomly do poorly. Second, larger accounts diversify more effectively and thereby earn higher average log returns even though their average simple returns are no higher than those of smaller accounts.

Keywords: inequality, diversification, stock investment, India

JEL Classification: D14, D31, G11

Suggested Citation

Campbell, John Y. and Ramadorai, Tarun and Ranish, Benjamin, Do the Rich Get Richer in the Stock Market? Evidence from India (July 31, 2018). Available at SSRN: https://ssrn.com/abstract=3141759 or http://dx.doi.org/10.2139/ssrn.3141759

John Y. Campbell

Harvard University - Department of Economics ( email )

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HOME PAGE: http://scholar.harvard.edu/campbell

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Tarun Ramadorai (Contact Author)

Imperial College London ( email )

South Kensington Campus
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London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Benjamin Ranish

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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