Windfall Gains and Stock Market Participation

Reprint No. 2021:1

Author(s): Joseph Briggs, David Cesarini, Erik Lindqvist and Robert ÖstlingYear: 2021 Title: Journal of Financial Economics Volume (No.): 139 (1) Pages: 57–83
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Windfall Gains and Stock Market Participation Joseph Briggs, David Cesarini, Erik Lindqvist and Robert Östling

We exploit the randomized assignment of lottery prizes in a large administrative Swedish data set to estimate the causal effect of wealth on stock market participation. A $150,000 windfall gain increases the stock market participation probability by 12 percentage points among prelottery nonparticipants but has no discernible effect on prelottery stock owners. A structural life cycle model significantly overpredicts entry rates even for very high entry costs (up to $31,000). Additional analyses implicate pessimistic beliefs regarding equity returns as a major source of this overprediction and suggest that both recent and early-life return realizations affect beliefs.

Briggs, Joseph, David Cesarini, Erik Lindqvist and Robert Östling (2021), "Windfall Gains and Stock Market Participation". Journal of Financial Economics 139(1), 57–83.

Erik Lindqvist


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