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

26 Pages Posted: 22 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); European Corporate Governance Institute (ECGI)

Benjamin Ranish

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: August 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.

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Suggested Citation

Campbell, John Y. and Ramadorai, Tarun and Ranish, Benjamin, Do the Rich Get Richer in the Stock Market? Evidence from India (August 2018). NBER Working Paper No. w24898, Available at SSRN: https://ssrn.com/abstract=3236701

John Y. Campbell (Contact Author)

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Tarun Ramadorai

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Benjamin Ranish

Board of Governors of the Federal Reserve System ( email )

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