Europeans really don’t like to invest in stocks

It has become a trope to say that there is no equity investment culture in continental Europe (at least nowhere near what we see in the Anglo-Saxon world). A new study shows that even if people win the lottery or gain a similar windfall, they may invest more in stocks, but the majority of households still won’t touch stocks.

The researchers used the Eurozone’s Consumer Expectation Survey, which collects responses from 2,000 households in each of Germany, France, Italy, and Spain plus 1,000 households in each of the Netherlands and Belgium, to assess what they would do if they had a lottery win between €5,000 and €50,000.

It’s not life-changing money, but we know from behavioural finance studies that people tend to invest windfall gains more aggressively than money they earned because these windfall gains are part of a different mental account. Also, we know from behavioural finance that people who have more money tend to invest more in stocks because they can afford to lose more.

And these foundational results are visible in the Eurozone data as well. Once confronted with a lottery win, people are inclined to invest at least some of their money in stocks or stocks and mutual funds. But this effect is small. Even after winning €50,000 in a lottery, the participation rate of non-stockholders increases by 8.4 to 12.8 percentage points. At the same time, the average share of money invested in stocks hardly changes for those previously invested in the stock market.

What is more, even with such a windfall gain, more than 60% of households in the Eurozone would still not invest in stocks at all. It clearly takes a lot more than just a windfall gain to get Europeans to invest in stocks.

Share of households invested in stocks and mutual funds