Time Horizon, Saving Motive and Stock Market Participation
1 Pages Posted: 1 May 2021
Date Written: April 24, 2021
This paper shows that household’s saving motives influence key portfolio choice decision: stock market participation. We utilize a unique data set from the Survey of Consumer Finance (2019 and panel 2007-209), which report about 24 reasons for saving and group these intro 6 saving motive categories: durable, retirement, bequest, emergency, smooth and luxury. Our channel to identify how saving motives influence portfolio choice encompasses the time horizon, from the household’s view, about the planning time horizon to save. For instance, households place longer time horizon for bequest, retirement and consumption smoothing, while shorter time horizon for durable or luxury based saving motives. The longer the time horizon the greater: risk tolerance and stock market participation. Altogether, saving motive influences time horizon, which has implication on households’ portfolio choice.
Keywords: Saving motives, time horizon, behavioral finance, portfolio choice and stock market participation
JEL Classification: G10, G12
Suggested Citation: Suggested Citation