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Title:Portfolio inertia and stock market fluctuations PDF Logo
Authors:Bilias, Yannis
Georgarakos, Dimitris
Haliassos, Michael
Issue Date:2006
Series/Report no.:CFS Working Paper 2006/14
Abstract:Several recent studies have addressed household participation in the stock market, but relatively few have focused on household stock trading behavior. Household trading is important for the stock market, as households own more than 40% of the NYSE capitalization directly and can also influence trading patterns of institutional investors by adjusting their indirect stock holdings. Existing studies based on administrative data offer conflicting results. Discount brokerage data show excessive trading to the detriment of stockholders, while data on retirement accounts indicate extreme inactivity. This paper uses data representative of the population to document the extent of household portfolio inertia and to link it to household characteristics and to stock market movements. We document considerable portfolio inertia, as regards both changing stockholding participation status and trading stocks, and find that specific household characteristics contribute to the tendency to exhibit such inertia. Although our findings suggest some dependence of trading directly-held equity through brokerage accounts on the performance of the stock market index, they do not indicate that the recent expansion in the stockholder base and the experience of the stock market downswing have significantly altered the overall propensity of households to trade in stocks or to switch participation status in a way that could contribute to stock market instability.
Subjects:Stockholding
Portfolio Inertia
Stock Trading
Household Portfolios
JEL:G11
E21
Persistent Identifier of the first edition:urn:nbn:de:hebis:30-27731
Document Type:Working Paper
Appears in Collections:CFS Working Paper Series, Universität Frankfurt a. M.

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