The Effects of Stock Ownership on Individual Spending, Investments, and Loyalty

In this paper, we analyze how one of the most fundamental behavioral biases in investing—people’s preference for buying specific stocks rather than holding the market portfolio—affects their life-cycle consumption, savings, and stock market participation. We first show that when investors receive stocks from specific companies, they increase their spending in those companies’ stores. Although specific stock ownership increases total spending in the short run, individuals’ overall stock market investments increase in the long run. For identification, we use the staggered allocation of brokerage accounts to individuals over time as well as quasirandomly distributed stock grants. This paper was accepted by Will Cong, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.05567 .