The determinants of stock market participation amongst Maltese households using the household finance and consumption survey

Abstract

The determinants of stock market participation amongst Maltese households using the household finance and consumption survey This dissertation examines the determinants of stock market participation amongst Maltese households, with the objective of understanding their low level of participation in stock markets. Using microdata from the fourth wave of the Household Finance and Consumption Survey and applying it to a survey-weighted probit model, this study analyses the impact of demographic, educational and financial characteristics on the probability of household participation in the stock market. The empirical findings of this study, based on average marginal effects from the main model, show that the most influential explanatory variables on stock market participation are ownership of fixed-term deposits, followed by bond ownership and educational attainment. In contrast, the independent variables of age and gender only have a marginal impact on participation. Robustness checks were carried out, confirming the stability of the results of the survey-weighted probit model. This study contributes to the literature by offering the first detailed analysis of stock market participation using the Household Finance and Consumption Survey for Malta, shedding light onto household investment behaviour in a small island economy with high concentration of investment in real estate. The policy implications suggest that increasing financial literacy of the general population and creating targeted awareness campaigns could reduce informational barriers. In turn, this promotes stock market participation as a tool for retirement planning and wealth accumulation, which ultimately alleviates pressure on public pension systems. Furthermore, higher stock market participation levels have the potential to increase household portfolio diversification, which strengthens financial resilience against economic downturns.