Personal values and stock market participation - Evidence from Finnish university students

Abstract

PURPOSE OF THE STUDY

The objective of this study is to find out whether personal values affect the decision of an individual to invest in the stock market. The main motivation is to shed further light on the phenomenon of limited stock market participation, which has been shown to have significant economic impacts, both micro and macro. By investigating the influence of personal values on the probability of participation and on the different reasons for non-participation, the study fills a gap in the existing behavioral finance literature.

As the topic has not been researched before, generally accepted methodologies do not exist. Thus my paper also contributes by introducing a method to connect personal values to investment decisions. The approach I choose is to combine the theory of personal values of Schwartz (1992) to stock market participation. This method provides measures of both personal values and investment behavior that are easy to quantify.

DATA

My data consist of information gathered using a tailored questionnaire about the demographics, characteristics, investment experience, and personal values of a respondent. The sample includes 320 university students from the Helsinki area in Finland. According to the university attended, the respondents can be grouped into students of business, technology, and natural or social science.

RESULTS

I find that personal values significantly affect the probability of stock market participation. The respondents who emphasize the Self-Enhancement values of power and achievement are more likely to have invested in the stock market than the others. The influence of value orientation is stronger than that of several previously suggested determinants of participation, which shows that differences in personal values are partly causing the limited participation phenomenon. When studying the reasons for non-participation reported by the respondents, I also find evidence of the effect of values. Emphasis of the Conservation values of tradition, conformity, and security increases the probability of reporting non-interest in stocks and equity funds as the reason for not investing.

KEYWORDS

Stock market participation, personal values