Abstract
We exploit the randomized assignment of lottery prizes in a large administrative Swedish data set to estimate the causal effect of wealth on stock market participation. A $150,000 windfall gain increases the stock market participation probability by 12 percentage points among prelottery nonparticipants but has no discernible effect on prelottery stock owners. A structural life cycle model significantly overpredicts entry rates even for very high entry costs (up to $31,000). Additional analyses implicate pessimistic beliefs regarding equity returns as a major source of this overprediction and suggest that both recent and early-life return realizations affect beliefs.
Original language | English (US) |
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Pages (from-to) | 57-83 |
Number of pages | 27 |
Journal | Journal of Financial Economics |
Volume | 139 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2021 |
Keywords
- Household saving and personal finance
- Intertemporal consumer choice
- Portfolio choice and investment decisions
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Strategy and Management