Educational Determinants of Stock Market Participation In College
The stock market participation rate is the fraction of people who invest in the stock market, as defined by Hong [6] and others. The stock market (or equity market) is a public entity for the trading of company stock. A share of stock is one type of negotiable financial instrument representing financial value, or security. Other types of securities include bonds and derivatives. Stocks and bonds are the two main types of securities for common investors. Generally, stocks are riskier than bonds (but usually come with a higher return to compensate for the added risk). Anyone can choose to invest in the stock market, but not everyone chooses to do so. In 2008, one third of U.S. households owned stock directly (excluding those who only participated through various retirement vehicles) [3]. The literature in this area concerns itself with why or why not people choose to invest in the stock market. There are some costs associated with stock investments that should be taken into consideration. First, there are monetary costs. In order to participate in the stock market, an investor must have money to initially set aside for the investment. Second, participating in the stock market takes some time and effort, particularly for gaining knowledge. Since there is little that can be done about the monetary costs, the literature in stock market participation is mostly concerned with figuring out why non-participating households which have the available funds do not participate in the stock market, and why participating households choose to particpate. Stock market participation is important for a number of reasons. First, personal investment decisions are important because they include accumulating funds for a home, car, education, and things pertaining to other personal goals and dreams. A household benefits greatly if their finances are managed well, especially when it comes to investment decisions. It can be argued that owning shares of stock can be an essential part of a persons investment portfolio. The more people that participate in the stock market, the more people that are better equipped when it comes to personal investment decisions.