Happiness and Stock-Market Participation: Empirical Evidence from China

Using the data from the China Household Finance Survey in 2011, we study the relation between happiness and stockholding. We find that a household's propensity of investing in stocks or mutual funds, as well as household asset shares invested in stocks or mutual funds, is strongly associated with happiness. Moreover, empirical results suggest that among the three potential channels we propose, the association between happiness and stockholding is driven by trust (or social capital), rather than households' risk preference or optimism level.