Full Citation

Title: Political Uncertainty and Household Stock Market Participation

Citation Type: Conference Paper

Publication Year: 2018

ISBN:

ISSN:

DOI: 10.2139/ssrn.3068792

NSFID:

PMCID:

PMID:

Abstract: Using a unique micro-level panel dataset, we relate households’ stock market participation to policy uncertainty. We show that households significantly reduce their equity participation during periods of high policy uncertainty, identified by gubernatorial elections. The magnitude of the participation cycles varies with risk aversion, employment risk, and cost of processing information. In certain situations, election-triggered drop in participation is followed by a partial increase in post-election years as the uncertainty over policy outcomes subsides, reflecting a real distortion. Our findings suggest that policy uncertainty is an important channel through which the political process creates a negative externality in financial markets.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3068792

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Authors: Agarwal, Vikas; Aslan, Hadiye; Huang, Lixin; Ren, Honglin

Conference Name: 29th Annual Conference on Financial Economics & Accounting 2018

Publisher Location: New Orleans, LA

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

Countries: