Resource title

Participation Constraints in the Stock Market - Evidence from Unexpected Inheritance due to Sudden Death

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Resource description

We use a natural experiment to investigate the impact of participationconstraints on individuals' decisions to invest in the stock market. Unexpected inheritancedue to sudden deaths results in exogenous variation in financial wealth and allows us toexamine whether fixed entry and ongoing participation costs cause non-participation. Wehave three key findings. First, windfall wealth has a positive effect on participation.Second, the majority of households do not react to sizeable windfalls by entering thestock market, but hold on to substantial safe assets—even over longer horizons. Third,the majority of households inheriting stock holdings actively sell the entire portfolio.Overall, these findings suggest that participation by many individuals is unlikely to beconstrained by financial participation costs.

Resource author

Steffen Andersen, Kasper Meisner Nielsen

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Resource language

eng

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application/pdf

Resource resource URL

http://hdl.handle.net/10398/8169

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