Determinants of household stock holdings: evidence from the Survey of Consumer Finances

The purpose of this study is to understand the factors that influence household stock investment choices. Using the cross-sectional surveys of the Survey of Consumer Finance in the period 1992-2019 two type of empirical models were studied. In the first analysis, with probit models, the characteristics associated with the choice to own shares were analysed; subsequently, conditional on the shareholding, regression models were used to estimate the fraction of financial asset invested in shares. The data show that an important, albeit decreasing, portion of households do not invest in equities, through the probit model developed it is possible to estimate with an acceptable degree of accuracy whether the household has made the decision to enter the equity markets. It has been shown how net worth, the possession of a degree and retirement savings are positively correlated with the ownership of shares; on the contrary investments in real estate or private business, risk aversion and having more than two children are negatively related to shareholding. It was also proved that the use of the internet was significantly positively correlated with the holding of shares in the period 1998-2010. The choice of the fraction of financial capital allocated in shares is highly variable among households, even by controlling for many characteristics the predictive power of the regression models is limited, nevertheless it is possible to affirm that: aversion to risk, the possession of investments in real estate or business are negatively correlated with the fraction of risky assets held. On the other hand, a degree, the net worth, the high propensity risk are associable with a higher equity component in the model. Finally, in the regression model, the use of the internet to make financial choices has lost the significance that it had shown in the probit model.