Behavioral Portfolio Choice: Limited Stock Market Participation and Heterogeneous Portfolio Composition

Pan, Chen (2009) Behavioral Portfolio Choice: Limited Stock Market Participation and Heterogeneous Portfolio Composition. [Dissertation (University of Nottingham only)] (Unpublished)

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This dissertation studies two related puzzles in economic behavior, limited stock market participation and the heterogeneity in portfolio composition across households. It is aimed at evaluating the potential factors in terms of their ability to account for these puzzles. A set of household-level background risk exposures sourced from labor income and home equity are documented to explain some but not all aspects of the observed cross-sectional variation in portfolio choice. In particular, these background risks are statistically significant in determining a household’s stock market participation and portfolio allocation. Some demographic characteristics, such as age, education, wealth, mortgage loans are included as control variables and are estimated to exert great impact on households’ portfolio behavior.

In this dissertation, micro-level data from the UK and U.S. surveys are adopted to provide evidence on empirical findings and explore the differences between these two countries in their households’ portfolio choice, with an emphasis on the investigation of the determinants of stock ownership and equity shares. It shows very different ways people own stocks and form their financial portfolios. Particularly, British households behave in a more conservative manner of less willing to participate in the stock market and investing a smaller proportion of their wealth in stocks, whereas the equity premium is more favorable in the United States. The same set of explanatory variables is employed to examine the above behavior puzzles. However, the extent to which these variables act as crucial determinants varies in these two counties.

Item Type: Dissertation (University of Nottingham only)
Keywords: Behavioral Portfolio Choice
Depositing User: EP, Services
Date Deposited: 03 Feb 2010 12:54
Last Modified: 25 Apr 2018 12:14

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