Abstract:
Most households persistently invest in riskless assets but not stocks, and may do so because
they perceive the information required for market participation to be costly relative to expected
benefits. In a CCAPM, increased risk aversion, income risk, and lower resources reduce the
information expense sufficient to deter stockholding. Bivariate probit analysis using the 1983-89
Survey of Consumer Finances shows that households with lower risk aversion, higher education, and
greater wealth who were nonstockholders in 1983 had an increased conditional probability of entering
by 1989, while 1983 stockholders with lower resources, more limited education, and greater risk
aversion were more likely to be nonstockholders by 1989.
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