Institutional Quality, Trust and Stock-Market Participation: Learning to Forget

Summary, in English

We explore the relation between institutional quality, trust and stock-market participation. In our theoretical model, agents update their beliefs in a Bayesian manner based on observations on frauds and choose whether to invest in the stock market. The corresponding empirical model shows that institutional quality affects trust and that the part of trust that is explained by institutional quality influences stock-market participation. For immigrants, we consider learning factors, such as education and duration of stay, and we find that the impact of the institutional quality of the country of residence, relative to that of the home country, tends to increase with education.

• Author: Hossein Asgharian; Lu Liu; Frederik Lundtofte
• Department/s: Department of Economics
• Publishing year: 2014
• Language: English
• Publication/Series: Working Paper / Department of Economics, School of Economics and Management, Lund University
• Issue: 39
• Links: http://swopec.hhs.se/lunewp/abs/lunewp2014_039.htm
• Document type: Working paper
• Publisher: Department of Economics, Lund University
• Topic: Economics
• Keywords: institutional quality; learning; trust; stock-market participation
• Status: Published