Rethinking the stock market participation puzzle : a qualitative approach

We revisit the limited stock market participation puzzle leveraging a qualitative research approach that is commonly used in many social sciences, but much less so in economics or finance. We conduct in-depth interviews of stock market investors and non-investors in Germany, a highincome country with a low stock market participation rate. Differently from a survey using preset questions based on theory, we elicit views in an open-ended discussion, which starts with a general question about "money," is not flagged as regarding stock market participation, and allows for probing and follow-up questions. Many of the factors proposed by the literature are mentioned by interviewees. However, non-investors perceive surprisingly high entry and participation costs due to a fundamental misconception of the potential for selecting "good" stocks and avoiding "bad" ones and for market timing through continuous monitoring and frequent trading. Surprisingly, the investors we interview often share these views. However, they find a way to overcome these perceived costs with the help of family, friends, or financial advisors they trust. While the insights from our qualitative interviews are based on a small number of interviewees, we find consistent evidence in a population-wide survey of investors and non-investors.