Household Stockholding in Europe: Where Do We Stand, and Where Do We Go?
Einaudi Institute for Economics and Finance (EIEF)
University of Naples Federico II - Department of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Center for Studies in Economics and Finance - CSEF
Goethe University Frankfurt - House of Finance; Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR
CEPR Discussion Paper No. 3694
We discuss the current state of stock ownership among households in major European countries (France, Germany, Italy, the Netherlands, Sweden and the UK), drawing parallels and contrasts with the US experience. We use detailed microeconomic datasets and explore the extent to which observed international differences in stockholding can be attributed to differences in household characteristics. Statistical analysis finds (1) an increase in stock market participation in all countries; (2) persistent differences across countries, with the US, the UK and Sweden having considerable more participation than France, Germany, Italy; (3) a robust correlation between the participation decision on the one hand, and wealth and education on the other; (4) a relatively small effect of education and wealth on the asset share invested in stocks, conditional on participation. Interestingly, international differences in stock market participation remain large even when we control for household characteristics. As our empirical results point to the relevance of participation costs, we probe into a number of indicators of such costs, and we find that these are consistent with the observed pattern of participation across countries. Since the lowering of such costs brings into the market households with different characteristics than incumbents, we discuss their likely impact, policy concerns, and types of policies that could mitigate their adverse impact on the future workings of the market.
Number of Pages in PDF File: 51
Keywords: Portfolio choice, stock ownership, household finance
JEL Classification: D80, E20, G10
Date posted: January 31, 2003