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Stock market literacy, trust, and participation.

Balloch, A. and Nicolae, A. and Philip, D. (2015) 'Stock market literacy, trust, and participation.', Review of finance., 19 (5). pp. 1925-1963.


This article studies the importance of stock market literacy and trust for stock ownership decisions. We find that these two distinct channels simultaneously explain not only the probability of participation, but, conditional on participation, also explain the share of investment in stocks. Once we account for stock market literacy, sociability is no longer significant for participation; what matters is literacy rather than sociability. Further, we observe that economic shocks and future expectations are key behavioral characteristics that explain a household’s decision to invest in stocks. However, upon participation, a larger set of behavioral characteristics explains the level of stock investment.

Item Type:Article
Keywords:Financial literacy, Trust, Sociability, Stock market participation, Participation cost.
Full text:(AM) Accepted Manuscript
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Publisher statement:This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Finance following peer review. The definitive publisher-authenticated version Adnan Balloch, Anamaria Nicolae, and Dennis Philip (2015) Stock Market Literacy, Trust, and Participation, Review of Finance, 19 (5): 1925-1963 is available online at:
Date accepted:18 August 2014
Date deposited:29 August 2014
Date of first online publication:18 September 2014
Date first made open access:18 September 2016

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