In an interview with the German business weekly Wirtschaftswoche, Luca Henkel, PhD candidate at the University of Bonn and research assistant at briq, points out that the negative image of stock owners may be responsible for low stock ownership rates. Below is an English translation of the interview (see original German version here).
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You conducted a study to find out people’s opinion on stockholders. Probably not a good one, right?
We started from the observation that many people, especially in Germany, do not participate in the stock market, and we investigated the role played by opinions and prejudices about stockholders. In our study, we show that people perceive stockholders very negatively and that these views have a concrete influence on their decisions to invest in the stock market. Specifically, because most people think that stockholders are more selfish and greedy than non-stockholders, they do not invest in the stock market themselves.
In your study, you examined groups from the Netherlands and the United States. What can be deduced from this for Germany?
In Germany, we lack concrete data so far, but we are currently working on that. Surveys among our students at the University of Bonn, however, seem to confirm the findings from the Netherlands. So in our country, too, there is a very negative perception of stockholders.
That fits in with the notion of the German “Aktienmuffel” who shuns stocks in general. But you write that in the U.S., with 86 percent of respondents, even more people perceive stockholders negatively than in the Netherlands (81 percent). How can that be explained?
The two figures are not fully comparable due to limitations in the U.S. data. In the Netherlands, we surveyed a representative population group. In the U.S., the responses were collected via an online panel. This is not representative of the population as a whole, and significantly fewer people took part there – only around 400, compared to almost 3,300 in the Netherlands. This difference explains parts of the results, which are surprising at first glance.
Stockholders have a bad image either way. But stocks have nevertheless become more popular as an asset class over the past ten years, when interest rates were exceptionally low for a long time. Does that show up in your data?
No, older people have neither more positive nor more negative attitudes toward stockholders than younger people. But older people are more likely to let these attitudes guide their behavior. So young people who are skeptical about stockholders show a greater willingness than older people to invest in the stock market.
Does people’s own wealth influence how they feel about stockholders?
Half of the richest 20 percent in the Netherlands own no stocks at all. Around 40 percent, in turn, have no significant assets to invest in the stock market. However, one’s own wealth does not play a decisive role in the question of how one feels about stockholders. The perception is predominantly negative in all wealth groups.
Does the negative perception only apply to stockholders? Are bondholders or real estate investors more popular?
We have not investigated this. What we can say, however, is that ETF investors or those who invest in sustainable financial products have a better reputation. But they are still perceived more negatively than non-stockholders.
Some seem ashamed of being a stockholder. Your respondents fibbed to you about that, didn’t they?
That’s right. In our research in the Netherlands, we had the opportunity to match the information on stock ownership in our survey with their tax records, which we believe provide a more realistic picture than surveys. The result of the comparison was astonishing: One-third of the respondents who, according to their tax records, owned stocks, reported to us that they did not own any. Conversely, only two percent of respondents whose tax records did not show stock ownership stated that they were stockholders.
So because people think negatively about shareholders, they fib and invest less in the stock market. How can this mechanism be overcome?
Our results suggest that, above all, the opinion about stockholders is a major obstacle to individual investing. Neobrokers have recognized this. They address precisely these stereotypes with their advertising campaigns, in which they show everyday people on the couch or on the train trading stocks. The idea is to get away from the image of the stockholder seen in Wall Street movies. Lack of financial knowledge, which is often cited as the main reason for low stock ownership rates, is not the main problem, according to our data.