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Financial Literacy, Human Capital and Stock Market Participation in Europe

Author

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  • Ashok Thomas

    (Indian Institute of Management)

  • Luca Spataro

    (University of Pisa)

Abstract

Households’ stock market participation has significant effects on savings and on an economy’s financial development and performance. Yet participation into capital markets is limited and quite heterogonous both among and within several countries. This phenomenon represents an empirical puzzle whose understanding is rather incomplete. In this work, we exploited a combination of datasets for nine European countries and used different econometric specifications that allow to control for endogeneity of financial literacy and human capital, to assess the role of several variables in affecting the probability to participate in the stock market in year 2010. Besides socio-demographic variables, we found that financial literacy has a positive and significant effect on stock market participation, together with the level of human capital and social interaction. Country level differences are explained by such institutional factors as the effectiveness of the education system and by the attractiveness of the stock markets.

Suggested Citation

  • Ashok Thomas & Luca Spataro, 2018. "Financial Literacy, Human Capital and Stock Market Participation in Europe," Journal of Family and Economic Issues, Springer, vol. 39(4), pages 532-550, December.
    • Handle: RePEc:kap:jfamec:v:39:y:2018:i:4:d:10.1007_s10834-018-9576-5
    DOI: 10.1007/s10834-018-9576-5
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    3. Marshall Wellington Blay & Alhassan Musah & Charles Ayariga & Daniel Odei Okyere, 2024. "Determinants of Financial Literacy and its Effect on Stock Market Participation among University Students in Ghana," International Journal of Economics and Financial Issues, Econjournals, vol. 14(2), pages 15-25, March.
    4. Andriy Tsapin & Oleksandr Faryna, 2024. "The Role of Financial Literacy in Anchoring Inflation Expectations: The Case of Ukraine," Working Papers 02/2024, National Bank of Ukraine.
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    6. Hyungkee Young Baek & David D. Cho, 2022. "Overconfidence and risky investment choices," Economics Bulletin, AccessEcon, vol. 42(4), pages 2267-2278.
    7. Nataliya Barasinska & Dorothea Schäfer, 2018. "Gender role asymmetry and stock market participation – evidence from four European household surveys," The European Journal of Finance, Taylor & Francis Journals, vol. 24(12), pages 1026-1046, August.
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    10. Yi Jiang & Shohei Shimizu, 2024. "Does Financial Literacy Impact Investment Participation and Retirement Planning in Japan?," Papers 2405.01078, arXiv.org.
    11. Martinson Ankrah Twumasi & Hongyun Zheng & Love Offeibea Asiedu-Ayeh & Anthony Siaw & Yuansheng Jiang, 2023. "Access to Financial Services and Its Impact on Household Income: Evidence from Rural Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(4), pages 869-890, August.
    12. Isidore, Renu & Arun, C. Joe, 2023. "The Moderating Effect of Financial Literacy on the Relationship Between Decision-Making Tools and Equity Returns in the Indian Secondary Equity Market," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 15(1), pages 185-211, January.
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