The Effect of Stock Ownership on Individual Spending, Investments, and Loyalty

69 Pages Posted: 26 Feb 2021 Last revised: 2 Nov 2023

See all articles by Paolina C. Medina

Paolina C. Medina

University of Houston

Vrinda Mittal

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Michaela Pagel

Columbia University - Columbia Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 26, 2023

Abstract

In this paper, we analyze how one of the most fundamental behavioral biases in investing—people’s preference for buying specific stocks rather than holding the market portfolio—affects their life-cycle consumption, savings, and stock-market participation. We first show that when investors receive stocks from specific companies, they increase their spending in those companies’ stores. While specific stock ownership increases total spending in the short run, individuals’ overall stock market investments increase in the long run. For identification, we use the staggered allocation of brokerage accounts to individuals over time as well as quasi-randomly distributed stock grants.

Keywords: stock ownership, individual spending, loyalty, fin-tech

JEL Classification: G5, D90, G41, D14

Suggested Citation

Medina, Paolina C. and Mittal, Vrinda and Pagel, Michaela, The Effect of Stock Ownership on Individual Spending, Investments, and Loyalty (October 26, 2023). Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3783335 or http://dx.doi.org/10.2139/ssrn.3783335

Paolina C. Medina

University of Houston ( email )

4750 Martin Luther King Blvd
Houston, TX 77204-60
United States

Vrinda Mittal (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://https://www.vrindamittal.com

Michaela Pagel

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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