Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154090
Authors: 
Barth, Daniel
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1657
Abstract: 
This paper develops a structural model of the costs and beliefs required to rationalize household direct stock ownership. In the model, households believe they can learn information about individual stock returns through costly research. The model provides a novel explanation for many empirical features of household portfolios. Further, the model identifies the distributions of both household research costs and household beliefs about the predictability of individual stock returns. Identification depends only on households’ wealth and portfolio choices. Parameter estimates suggest that most households have modest beliefs about the benefits of individual stock research, although a minority must expect extraordinary returns.
Subjects: 
direct stock ownership
household beliefs
research costs
under-diversification
JEL: 
G02
G11
Document Type: 
Working Paper

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