Stock market ownership transitions

Yosef  Bonaparte; George M.  Korniotis; Alok  Kumar; Alexander Michaelides; Yuxin Zhang

doi:10.1287/mnsc.2023.00290

Stock market ownership transitions

Yosef Bonaparte, George M. Korniotis, Alok Kumar, Alexander Michaelides, Yuxin Zhang

Department of Finance, Accounting and Economics

Research output: Journal Publication › Article › peer-review

Abstract

A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. We find that a life-cycle model with participation costs cannot match the observed ownership dynamics. An extension with a stock-market crash fits better the average participation rate and the ownership transitions of the middle-aged and retired, but not the ownership dynamics of the young, which is better captured by a model with elevated income risk. Overall, across the life-cycle, ownership transitions respond to wealth shocks in both model and data.

Original language	English
Pages (from-to)	4977-5000
Journal	Management Science
Volume	71
Issue number	6
Early online date	24 Sept 2024
DOIs	https://doi.org/10.1287/mnsc.2023.00290
Publication status	Published - Jun 2025

Keywords

stock market transitions
trading costs
life cycle portfolio decisions
rare disaster
income and wealth shocks

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10.1287/mnsc.2023.00290

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title = "Stock market ownership transitions",

abstract = "A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. We find that a life-cycle model with participation costs cannot match the observed ownership dynamics. An extension with a stock-market crash fits better the average participation rate and the ownership transitions of the middle-aged and retired, but not the ownership dynamics of the young, which is better captured by a model with elevated income risk. Overall, across the life-cycle, ownership transitions respond to wealth shocks in both model and data.",

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author = "Yosef Bonaparte and Korniotis, {George M.} and Alok Kumar and Alexander Michaelides and Yuxin Zhang",

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AU - Korniotis, George M.

AU - Kumar, Alok

AU - Michaelides, Alexander

AU - Zhang, Yuxin

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N2 - A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. We find that a life-cycle model with participation costs cannot match the observed ownership dynamics. An extension with a stock-market crash fits better the average participation rate and the ownership transitions of the middle-aged and retired, but not the ownership dynamics of the young, which is better captured by a model with elevated income risk. Overall, across the life-cycle, ownership transitions respond to wealth shocks in both model and data.

AB - A significant portion of U.S. households enters and exits investment accounts. Empirically, income and wealth changes are related to these transitions, with income changes not affecting the retired. We find that a life-cycle model with participation costs cannot match the observed ownership dynamics. An extension with a stock-market crash fits better the average participation rate and the ownership transitions of the middle-aged and retired, but not the ownership dynamics of the young, which is better captured by a model with elevated income risk. Overall, across the life-cycle, ownership transitions respond to wealth shocks in both model and data.

KW - stock market transitions

KW - trading costs

KW - life cycle portfolio decisions

KW - rare disaster

KW - income and wealth shocks

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VL - 71

SP - 4977

EP - 5000

JO - Management Science

JF - Management Science

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Stock market ownership transitions

Abstract

Keywords

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