@article{5066a2cee6004c7b98ecb09e68573861,
title = "Does it pay to invest? The personal equity risk premium and stock market participation",
abstract = "Individuals{\textquoteright} stock market participation depends on the risk-return trade-off they expect to achieve. We find that the expected economic benefits of investing are highly heterogeneous. We define the personal equity risk premium (PERP) as the difference between an individual's expectation of returns and personal opportunity cost of capital. Higher PERP is associated with greater stock market participation. Our results hold after we control for known factors, such as financial literacy, trust, and loss aversion, and are stronger for the level of stock investment. Disentangling PERP shows that both components help explain both stock market participation and the level of participation.",
keywords = "Equity risk premium, Financial literacy, Loss aversion, Stock market participation, Trust",
author = "Yulia Merkoulova and Chris Veld",
note = "Funding Information: We thank Geert Bekaert, Stephen Brown, Ming Dong, Marie Dutordoir, Neal Galpin, Jean-Paul Rabanal, and Ziwei Zhao for their useful comments. Abe de Jong, Amale Scally, and John Watson provided helpful comments on the survey instrument. The project described in this paper relies on data from survey(s) administered by the Understanding America Study (UAS), which is maintained by the Center for Economic and Social Research at the University of Southern California (USC). The content of the paper is solely the responsibility of the authors and does not necessarily represent the official views of USC or UAS. We thank Jill Darling for her help with the panel. The authors acknowledge financial support from Monash Business School. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",
year = "2022",
month = mar,
doi = "10.1016/j.jbankfin.2021.106220",
language = "English",
volume = "136",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
}