Title: Non-participation in stock markets: a road map for policy initiatives in India

Authors:Shailesh Rastogi, Arpita Sharma, Chetan Panse
Journal:Finance India
Publication date: Jun-21
Publisher: Indian Institute of Finance, New Delhi
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This paper aims at addressing the issue of non-participation in the stock market (NPS). Logical and deterministic models fail to explain the causes of NPS. However, behavioural aspects can provide a solution to the problem of NPS. This paper incorporates behavioural aspects and address the issue of NPS. The paper uses a two-stage approach. First stage, explores literature to find factors/constructs relevant for NPS. Second stage, runs a structural model to address the problem of NPS and provide a solution to the problem. Study found that KSM (knowledge about the stock market), TSM (trust in the stock market) and AFI (availability of funds for investment) contribute to WIS (willingness to invest in stocks). WIS impacts SIS (satisfaction from investment in stocks), which is mediated by TFI (time for investments). TFI negatively mediates the relationship between WIS and SIS, which is one of the main contributions of the paper. The main implication is that the policy makers should pay attention to build trust among people in the stock market through transparency, and make efforts to increase financial literacy. Another implication is that the trading in the stock market should be made simpler so that it would be less time consuming.