Essays on investment decisions of households across the wealth spectrum

Research output: ThesisDoctoral ThesisCollection of Articles


This dissertation consists of an introductory chapter and four essays. The first essay provides first field evidence on the effect of financial resources on real economic decisions. A sudden increase in inventory costs tightens consumption budgets in a population of self-employed vendors of a Big Issue-type "street paper". After the budget shock, vendors become more responsive to expected demand in their stock-up decisions, and increase their inventory turnover. The timing of the behavior changes is consistent with the tightening budget having a causal impact on vendors' decisions. In the second essay, I study whether and how expectations about financial safety nets may affect decisions to save and invest. Expected pensions are known to crowd out households' risk-free savings, but evidence on how they affect household participation in risky asset markets is mixed. Using rich survey data from Finland, I show that a negative outlook on the public pension system triggers private risky investments only among high-earning, financially sophisticated males. The less financially sophisticated appear to perceive risky securities and pension benefits as complements. The third essay analyzes stock market participation in 19 European countries over 2004-2013, jointly controlling for all relevant variables from prior literature. Previous work relies on a subset of these factors, and often lacks good risk aversion proxies. Our full model explains 30% of the variation in the participation decision. Institutional factors captured by country fixed effects contribute 9.5 percentage points; traditional individual-level factors, such as risk aversion and income, contribute 15 pp; recently identified factors, such as trust and health, contribute 5.5 pp. We suggest a hierarchical framework for thinking about effects in the high versus low end. The fourth essay, in contrast to the economics of happiness literature focusing on the link between income and reported life satisfaction, explores the relation between life satisfaction and holding stocks. We find that stock market participation explains happiness over and above other measures of financial affluence. Changes in individual participation status and happiness over time provide some evidence consistent with a causal relation. A potential channel that we study and find evidence for is increased social utility.
Translated title of the contributionEssays on investment decisions of households across the wealth spectrum
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
  • Kaustia, Markku, Thesis Advisor
Print ISBNs978-952-60-7100-8
Electronic ISBNs978-952-60-7095-7
Publication statusPublished - 2016
MoE publication typeG5 Doctoral dissertation (article)


  • economic decision making
  • household finance
  • investment decisions
  • portfolio choice
  • economics of happiness


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