Domestic Investors Participation in Equity Market

Some of the important points to remember related to the Countrywise domestic investors participation rates in the domestic equity market:

1. Japanese are highly risk averse with households holding only 6% of their total assets in stocks compared with 33% in the U.S. and 15% in Europe according to the Bank of Japan.

2. Among the developed countries, Australia has the participation rate at over 40% and Belgium has the lowest rate at 5.0%. 

3. At 26%, the U.S. has a high participate rate relative to most developed countries. 

4. Emerging countries such as India and Turkey have very low participation rates. 

5. Investors in Nordic countries trust the stock markets more than their European counterparts in countries like France, Germany, Italy, etc. 

6. Rich households always have high participation rates. Poor and middle-class households always have lower participation rates according to one study. 

7. The data shown in the above chart are for the period from 1997 to 2000 and only represents direct holdings. Indirect holdings via mutual funds and other forms are not included in the figures noted. 

8. Strong investor protection also leads to higher participation rates. Hence developed countries tend to higher participation rates than emerging and frontier countries. 

9. Trust and sociability have sizable impact on stock market participation rates according to another study. Hence high average trust countries such as Denmark, Sweden and Switzerland have higher participation rates than low average trust countries like Austria, Spain and Italy. 

Lack of trust in stocks and the risk of being cheated are important factors that explain the limited participation rates in certain countries per a research paper titled “Trusting the Stock Market” by Luigi Guiso, Paola Sapienza and Luigi Zingales in The Journal of Finance in December 2008.