Do the Rich Get Richer in the Stock Market? Evidence from India
AbstractWe use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related to the prevalence of undiversified accounts that own relatively few stocks. First, some undiversified portfolios randomly do well, while others randomly do poorly. Second, larger accounts diversify more effectively and thereby earn higher average log returns even though their average simple returns are no higher than those of smaller accounts.
CitationCampbell, John Y., Tarun Ramadorai, and Benjamin Ranish. 2019. "Do the Rich Get Richer in the Stock Market? Evidence from India." American Economic Review: Insights, 1 (2): 225-40. DOI: 10.1257/aeri.20180158
- D14 Household Saving; Personal Finance
- D31 Personal Income, Wealth, and Their Distributions
- G11 Portfolio Choice; Investment Decisions
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance