Oehler, A., Horn, M., 2023, Households’ Decision on Capital Market Participation: What Are the Drivers? A Multi-Factor Contribution to the Participation Puzzle, Financial Services Review, 31(4), 283-305.
Abstract
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 voluntary pension plans, whole life insurance contracts, housing, and investments in risky assets other 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.
Keywords
Capital market participation, risk attitude, risky assets, household finance, structural equation analysis, financial literacy, financial decision making, human capital investment, life-cycle
JEL Classifications
D14, D81, D91, E21, G11, G41, G50, G51, I25, J24
Zuvor:
Oehler, A., Horn, M., 2023, Households’ Decision on Capital Market Participation: What Are the Drivers? A Multi-Factor Contribution to the Participation Puzzle; 2023 Annual Conference of the Academy of Financial Services - Advanced Research in Financial Planning, September 26-27; Psychonomic Society 2023 Annual Meeting, November 16-19; The Society for Judgment and Decision Making Annual Meeting 2023, November 17-20.
Auch:
Oehler, A., Horn, M., Wendt, S., 2024, Investment in Risky Assets and Participation in the Financial Market: Does Financial Literacy Matter?, International Review of Economics 71, 19-45.
Wanger, H. P., Oehler, A., 2023, Can Downside-Risk Measures Help to Explain the Reluctance of Households to Invest in XTFs? An Empirical Study Using the SHS-Base, Review of Behavioral Finance 15(3), 309-339.
Oehler, A., Horn, M., Wendt, S., 2022, Investment in Risky Assets and Financial Market Participation: Does Financial Literacy Matter?; Psychonomic Society 2022 Annual Meeting, November 17-20.
Oehler, A., Wanger, H. P., 2021, Can Downside-Risk Measures Help to Explain the Reluctance of Households to Invest in XTFs? An Empirical Study Using the SHS-Base; Behavioural Finance Working Group Conference, June 10-11.
Oehler, A., Wanger, H. P., 2020, Household Portfolio Optimization with XTFs? An Empirical Study Using the SHS-base, Research in International Business and Finance 51.
Oehler, A., Horn, M., 2019, Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence, Review of Behavioral Economics 6 (3), 249-282.
Oehler, A., Wanger, H. P., 2019, Household Portfolio Optimization with XTFs? An Empirical Study Using the SHS-base; EURO 2019, 30th European Conference on Operational Research, June 23-26.
Oehler, A., Horn, M., 2018, Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence; 2018 Annual Meeting of Academy of Behavioral Finance & Economics, October 17-20; FMA Annual Meeting, October 10-13; SABE/IAREP Conference, July 19-22.
Oehler, A., Horn, M., 2017, Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence; 53rd Meeting of the Eastern Finance Association (EFA), April 5-8, 2017; Academy of Behavioral Finance and Economics Conference 2017, March 16-17.
Oehler, A., Horn, M., 2016, Does Households’ Wealth Predict the Efficiency of their Asset Mix? Empirical Evidence; Research in Behavioral Finance Conference 2016, Amsterdam, September 15-16.
