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Vol. 83, No. 3
Posted 2001-05-01

A Simple Model of Limited Stock Market Participation

by Hui Guo

Stocks have outperformed government bonds, on average, by a large margin in historical data. However, most U.S. households do not own stocks, either directly or indirectly. Also, stocks are highly concentrated in the hands of relatively few wealthy people. In this article, Hui Guo describes some aspects of stock ownership. He then uses an overlapping-generations model to help explain why stock market participation is so limited and discusses some implications of limited stock market participation.




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