Time Horizon, Saving Motive and Stock Market Participation

1 Pages Posted: 1 May 2021

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Date Written: April 24, 2021

Abstract

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

Bonaparte, Yosef, Time Horizon, Saving Motive and Stock Market Participation (April 24, 2021). Available at SSRN: https://ssrn.com/abstract=3833475 or http://dx.doi.org/10.2139/ssrn.3833475

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

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