Thanks to the Danish civil registration number system it is possible to investigate the extent of the population’s investments in shares relative to their educational background. On the basis of a representative sample of the population (10 per cent) during the period 1997-2001, Jesper Rangvid and others have looked at observations on 405,271 private individuals’ investment decisions.
The study excludes all observable differences between persons such as gender, income and wealth. Thus, you may assess whether knowledge of economics, and thus knowledge of factors that drive the stock market, has an impact on the decisions that private investors make in relation to the stock market, apart from the influence that gender, income and wealth, etc. may have. The results of the study show that this specific knowledge of economics is the primary reason why economists are more likely to invest in shares than the average investor. The probability that the average investor with an education in economics (from a bank, business school or university) has acquired shares is 18 percentage points higher than for the average investor with a basic education. Jesper Rangvid finds the difference of 18 percentage points rather significant since they compared investors who have the same income, wealth, etc, - and the only difference between the investors was their choice of education.
Read the entire article ’Does knowledge of economics have an impact on private investors’ decision of whether to invest in shares?’ in Focus no. 108 at the Exchange’s website www.omxgroup.com. Also, view the webcast presentation by Jesper Rangvid, who presents the main results of the study.
Questions to the author may be sent to the e-mail address copenhagen@omxgroup.com until 2 May 2006.
