English, Article, Journal or magazine article edition: Stock market optimism and participation cost: a mean-variance estimation Andrea Tiseno; Monica Paiella

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Bookmark: http://trove.nla.gov.au/version/30631
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Stock market optimism and participation cost: a mean-variance estimation
Author
  • Andrea Tiseno
  • Monica Paiella
Physical Description
  • preprint
Notes
  • We use household data to estimate the cost of participating to financial markets and the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, within which we derive structural decision rules for individual composition of the risky assets portfolio to be efficient, as function of both the amount to invest and the optimism about excess return of stocks over bonds. Exploiting the observed heterogeneity in risky asset holdings, we identify both the fixed cost of stock market participation and the dispersion of optimism about excess return. Using the Italian Survey of Household Income and Wealth we estimate a fixed cost of participating to the stock market of about 150 euro per year and a standard deviation of 30% in the optimism about excess return
  • RePEc:ecm:latm04:239
  • This paper estimates the costs of participating to the stock market, together with the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, when there is a riskless asset (cash), which makes the allocation of the investment in risky assets (stocks and bonds) independent on preferences. Within this framework, we derive “structural” decision rules for the composition of the risky asset portfolio to be e¢cient. These rules depend on the amount invested in the risky portfolio and on investors' optimism, which are the determinants of the stock market return expected by a household, when participation involves a …xed cost. Using these rules and the heterogeneity in risky assets holdings and in the degree of optimism, we identify both the fixed costs of stock investment This paper estimates the costs of participating to the stock market, together with the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, when there is a riskless asset (cash), which makes the allocation of the investment in risky assets (stocks and bonds) independent on preferences. Within this framework, we derive “structural” decision rules for the composition of the risky asset portfolio to be e¢cient. These rules depend on the amount invested in the risky portfolio and on investors' optimism, which are the determinants of the stock market return expected by a household, when participation involves a …xed cost. Using these rules and the heterogeneity in risky assets holdings and in the degree of optimism, we identify both the fixed costs of stock investment
  • RePEc:dnb:dnbwpp:040
  • Using Italian household data we jointly estimate the yearly cost of participating to the stock market and the cross sectional distribution of optimism about excess returns of stocks over bonds. Using mean-variance analysis we derive individual efficient portfolio allocation rules, as functions of amount invested and optimism, which provide a structural latent variable model. The observed heterogeneity in amounts invested and in risky portfolio allocations delivers identification: we estimate a yearly cost of participation of about 100 euro and a standard deviation of 30% in optimism
  • heterogeneous household portfolios, mean-variance frontier, participation cost, expectation error
  • RePEc:red:sed006:714
Language
  • English
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