What drives stock market participation? The role of institutional, traditional, and behavioral factors

Kaustia, Markku; Conlin, Andrew; Luotonen, Niilo

doi:10.1016/j.jbankfin.2022.106743

Cited by 22 publications

(20 citation statements)

References 86 publications

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“…The results are presented in Table 6 . As shown in columns (3)-(5) of Table 6 , significant peer effects are observed in all age groups, and the strength of the peer effects first increases and then decreases as age increases.The findings of Kaustia et al (2023) [ 12 ] are in general agreement with the findings of this paper.…”

Section: Resultssupporting

confidence: 93%

“…On the one hand, financial literacy is positively correlated with the stock market participation of individual, affected by others’ financial literacy in same community. So peerfl -i C relates to other neighboring residents serves as the peer effects variable, which relevant to the independent variable ( peerstock -i C ) (Yin et al, 2014) [ 12 ]. On the other hand, the financial literacy of other neighboring residents, excluding the sample residents, does not affect the stock market participation of the sample, and uncorrelates with the random disturbance term.…”

Section: Resultsmentioning

confidence: 99%

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The peer effects of resident stock market participation: Evidence from 2019 CHFS

Lin,

Kong,

et al. 2024

PLoS ONE

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Limited resident’s participation in the stock market has become a key constraint to the capital market development. Utilizing the 2019 China Household Financial Survey (CHFS) data, our paper designs probit models to examine the peer effects of residents’ stock market participation and explore the intermediary mechanisms with a multiple intermediary model. We find that: (1) Resident involvement in stock market decision-making exhibits significant peer effects. (2) Heterogeneity analysis reveals that males and rural residents display more pronounced peer effects than females and urban residents. Additionally, middle-aged residents demonstrate more potent peer effects than their younger and older counterparts, with the intensity of peer effects correlating with education levels. (3)We observe that the peer effects of market participation operate by altering economic expectations and enhancing residents’ financial literacy. (4) Further investigation establishes that individuals engaging in stock market investments manifest peer effects when deciding whether to diversify their stock portfolio. This study holds reference value for analyzing the impact of social interaction on financial behaviors and regulating individuals’ financial conduct.

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Section: Resultssupporting

confidence: 93%

Section: Resultsmentioning

confidence: 99%

The peer effects of resident stock market participation: Evidence from 2019 CHFS

Lin,

Kong,

et al. 2024

PLoS ONE

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“…Research shows that financial literacy is essential for smart investment decisions. Financial literacy helps clients evaluate risk-reward trade-offs, which is critical to investment behavior, according to Kaustia, Conlin, and Luotonen (2023). Financial literacy helps risk-averse investors invest wisely (Fong, Koh, Mitchell, & Rohwedder, 2021).…”

Section: Discussionmentioning

confidence: 99%

Big Data, Artificial Intelligence, and Financial Literacy: Exploring their Combined Influence on Investment Behavior among Chinese Household

Zhang,

Sidik

2024

J INFORM SYSTEMS ENG

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The investing behavior of Chinese families is undergoing a dramatic transition in the context of the digital financial era, impacted by factors such as big data use, AI adoption, financial literacy, digital literacy, and risk aversion. Although prior research has offered useful insights into certain components, a thorough examination of their linked dynamics has been lacking. The purpose of this research was to look into how big data usage, AI adoption, financial literacy, digital literacy, and risk aversion influence investment behavior among Chinese households. Additionally, it aimed to learn more about how risk aversion and digital literacy function as mediators in these relationships. A questionnaire-based survey of 370 Chinese families was employed as part of the quantitative research methodology. The study employed AMOS to find the relationship between variables. The research found that big data usage, AI adoption, financial literacy, and digital literacy significantly and favorably influenced Chinese households' investment behavior. It was discovered that digital literacy mediated the linkages between the adoption of technology and investment decisions. Furthermore, risk aversion reduced the effects of financial literacy and big data usage on investment behavior. This study added to the body of knowledge by providing a comprehensive framework that incorporates several aspects impacting investment behavior. It shed insight into the complicated dynamics of technology uptake and literacy, as well as their impact on investment decisions. The study went beyond individual components to investigate their interactions, resulting in a more complex view of modern investment behavior. This study has broad-ranging effects that will help investors, financial institutions, governments, educators, and researchers. The focus on a particular setting and self-reported data are two important constraints that must be acknowledged. Future studies can investigate longitudinal dynamics and cross-cultural variances to further our understanding of investment behavior in the digital age.

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“…The participation of households in stock markets is one of the key issues in the literature on empirical financial markets in general and in the emerging field of household finance in particular (Campbell, 2006;Cocco et al, 2005;Guiso & Sodini, 2013;Halko et al, 2012;Kaustia et al, 2023;Oehler & Horn, 2021;Oehler et al, 2022a). Households without stock investments do not receive the equity premium and fail to invest efficiently (see Mehra & Prescott, 1985).…”

Section: Introductionmentioning

confidence: 99%

“…Although stock market investments are in the spotlight of the household finance literature, realworld households make other financial decisions of higher relevance (Kaustia et al, 2023). Decisions related to housing or human capital investments in earlier stages in the life-cycle are also important as are investments in risky assets other than stocks (e.g., bonds or mutual funds).…”

Section: Introductionmentioning

confidence: 99%

Households’ Decision on Capital Market Participation: What Are the Drivers? A Multi-Factor Contribution to the Participation Puzzle

Oehler,

Horn

2023

FSR

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Stock market investments are in the spotlight of the household finance literature, although real-world households make other financial decisions of higher relevance. We widen the scope and include decisions related to, e.g., voluntary pension plans, whole life insurance contracts, and housing and investments in other risky assets than stocks, e.g., bonds or mutual funds. Further, we provide a methodology that goes beyond regression analysis by employing a structural equation analysis (SEA) and apply it on data from a broad and representative survey of the German Central Bank. Our SEA allows us to investigate and quantitatively estimate complex relationships and to test several hypotheses simultaneously. Our structural equation model captures about 60% of the variation in the capital market participation decision. The results show that although households' financial literacy and risk aversion are most strongly related to investments in risky assets, further factors such as wealth, voluntary pension plans and whole life insurance contracts, financial advice, and investment experience should also be considered. Financial literacy is negatively related to risk aversion, i.e., the higher the financial literacy, the lower is the risk aversion. Age and gender are directly related to capital market participation and indirectly via financial literacy and risk attitude.

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What drives stock market participation? The role of institutional, traditional, and behavioral factors

Cited by 22 publications

References 86 publications

The peer effects of resident stock market participation: Evidence from 2019 CHFS

The peer effects of resident stock market participation: Evidence from 2019 CHFS

Big Data, Artificial Intelligence, and Financial Literacy: Exploring their Combined Influence on Investment Behavior among Chinese Household

Households’ Decision on Capital Market Participation: What Are the Drivers? A Multi-Factor Contribution to the Participation Puzzle

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