Temperance in Stock Market Participation: Evidence from France
Article first published online: 16 OCT 2008
© The London School of Economics and Political Science 2008
Volume 77, Issue 306, pages 314–333, April 2010
How to Cite
ARRONDEL, L., PARDO, H. C. and OLIVER, X. (2010), Temperance in Stock Market Participation: Evidence from France. Economica, 77: 314–333. doi: 10.1111/j.1468-0335.2008.00733.x
- Issue published online: 1 MAR 2010
- Article first published online: 16 OCT 2008
- Final version received 6 May 2008.
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.