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Temperance in Stock Market Participation: Evidence from France

Author

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  • Luc Arrondel

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Hector Calvo Pardo

    (University of Southampton)

  • Xisco Oliver

    (UIB - Universitat de les Illes Balears = Universidad de las Islas Baleares = University of the Balearic Islands)

Abstract

We explore empirically whether earnings uncertainty and borrowing constraints deter households from the stock market, consistent with the predictions of theoretical studies of portfolio choice in the presence of uninsurable earnings. Since recent extensions highlight the importance of the correlation between earnings and financial risks, here we use a self-assessed proxy from the DELTA-TNS 2002 cross-sectional survey to empirically assess the impact. Although income risk does not affect the participation decision of households' reporting a negative correlation, it does lower the participation of those who report a non-negative sign, consistent with economic theory predictions.

Suggested Citation

  • Luc Arrondel & Hector Calvo Pardo & Xisco Oliver, 2010. "Temperance in Stock Market Participation: Evidence from France," PSE-Ecole d'économie de Paris (Postprint) halshs-00754419, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00754419
    DOI: 10.1111/j.1468-0335.2008.00733.x
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    Cited by:

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    3. Gabriel Desgranges & Stéphane Gauthier, 2013. "Asymmetric information and rationalizability," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(3), pages 789-804, November.
    4. Nicholas Apergis & Christos Bouras, 2023. "Household choices on investing in financial risky assets: Do national institutional factors have their own merit?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 405-420, January.
    5. 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.
    6. Apergis, Nicholas, 2015. "Financial portfolio choice: Do business cycle regimes matter? Panel evidence from international household surveys," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 14-27.
    7. Brown, Sarah & Gray, Daniel & Harris, Mark N. & Spencer, Christopher, 2016. "Portfolio Allocation, Income Uncertainty and Households' Flight from Risk," IZA Discussion Papers 10408, Institute of Labor Economics (IZA).
    8. Christian Gollier & Miles S. Kimball, 2018. "Toward a Systematic Approach to the Economic Effects of Risk: Characterizing Utility Functions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 85(2), pages 397-430, June.
    9. Andrew Grant & Steve Satchell, 2019. "Endogenous divorce risk and investment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(3), pages 845-876, July.
    10. Harvey S. Rosen & Alexander J. W. Sappington, 2016. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," Education Finance and Policy, MIT Press, vol. 11(4), pages 404-425, Fall.
    11. Arrondel, L. & Savignac, F., 2009. "Stockholding: Does housing wealth matter?," Working papers 266, Banque de France.
    12. Guo, Xu & Wong, Wing-Keung & Zhu, Lixing, 2013. "Two-moment decision model for location-scale family with background asset," MPRA Paper 43864, University Library of Munich, Germany.
    13. repec:hal:pseose:hal-00780372 is not listed on IDEAS
    14. Eichner, Thomas & Wagener, Andreas, 2012. "Tempering effects of (dependent) background risks: A mean-variance analysis of portfolio selection," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 422-430.
    15. Nicholas Apergis & Tasawar Hayat & Tareq Saeed, 2019. "The Role of Happiness in Financial Decisions: Evidence from Financial Portfolio Choice and Five European Countries," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 343-360, September.
    16. Arrondel, Luc & Calvo-Pardo, Hector, 2014. "Endogenous non-tradable earnings and households’ demand for risky assets," Discussion Paper Series In Economics And Econometrics 1414, Economics Division, School of Social Sciences, University of Southampton.
    17. Brown, Sarah & Gray, Daniel & Harris, Mark N. & Spencer, Christopher, 2021. "Household portfolio allocation, uncertainty, and risk," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 96-117.
    18. Harvey S. Rosen & Alexander J. W. Sappington, 2015. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," NBER Working Papers 21271, National Bureau of Economic Research, Inc.
    19. Harvey S. Rosen & Alexander J.W. Sappington, 2015. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," Working Papers 244, Princeton University, Department of Economics, Center for Economic Policy Studies..

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