Template-Type: ReDIF-Paper 1.0
Title: Proud to Not Own Stocks: How Identity Shapes Financial Decisions
Author-Name: Luca Henkel
Author-Email: luca.henkel@uni-bonn.de
Author-Name: Christian Zimpelmann
Author-Email: zimpelmann@iza.org
Classification-JEL: G41, G51,D14, D83
Keywords: Identity, Perceptions, Stock Market Participation, Finacial Decision-Making

Abstract: This paper introduces a key factor influencing households' decision to invest in the
stock market, how people view stockholders. Using survey data from the US and the Netherlands, we
first document that the overwhelming majority of respondents view stockholders negatively –
they are perceived as greedy, gambler-like, and selfish individuals. We then provide experimental evidence 
that such perceptions of identity-relevant characteristics causally influence decision-making: if people 
view stockholders more negatively, they are less likely to choose stock-related
investments. Furthermore, by linking survey and administrative data, we show that negative perceptions 
strongly predict households’ stock market participation, more so than leading alternative
determinants. Beyond investment decisions, perceptions predict individuals’ polarizing behavior
towards stockholders, support for taxation and regulation of financial markets, and misreporting
in surveys. Our findings provide a novel explanation for the puzzlingly low stock market participation 
rates around the world, new perspectives on the malleability of financial decision-making,
and evidence for the importance of identity in economic decision-making.

Note: 
Length: 128
Creation-Date: 2022-12
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp380
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2022_380