1995/09/01 by Michael Haliassos, Carol C. Bertaut · 1,102 citations
Economics, Econometrics and Finance · #Computer science #Economic history #Economics #Editorial board #Global Financial Crisis and Policies #History #Law and economics #Library science #Political science
paper · doi:10.2307/2235407
published in The Economic Journal 105(432), 1110 (Oxford University Press)
openalex publication_date 1995/09/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
We investigate why 75% of United States households do not hold stocks despite the equity premium and predictions of expected-utility models. The question is relevant for privatisation, asset pricing, and tax progressivity issues. We show that risk aversion per se, heterogeneity of beliefs, habit persistence, time non-separability, and quantity constraints on borrowing do not account for the phenomenon. A wedge between borrowing and lending rates, and minimum-investment requirements are plausible but empirically weak factors. More promising explanations are inertia and departures from expected-utility maximisation. There is also qualified support for non-diversifiable income risk as a contributing factor.