Floccari, Giuseppe (2017) Italian household financial investments during and after the great recession. [Magistrali biennali]
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This work examines trends and developments of Italian household financial investments before, during and after the Great Recession. We first of all document the very low fraction of households that invest in the financial markets and how this fraction declined strongly during the last 15 years. In order to explain these patterns, we focus on the role of risk aversion, participation costs, trust and financial literacy in determining risky investment attitudes. We provide a theoretical discussion of how these factors can determine non participation and we address the issue empirically, by means of an econometric analysis. Coherently with the literature and the predictions of the theory, we find that poorer, lower educated and more risk averse households are less likely to hold risky financial assets. They are also more likely to have exited the stock market following the financial crisis of 2007-2008, possibly reflecting a loss in wealth, given the fixed participation cost. We also conjecture that a decrease in the level of trust following the financial crisis is a concurrent driver of the drop in participation and the main reason of the exit of richer and better educated households.
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