Households Debts and Financial Market Participation in Korea

This paper examines household participation in the financial market in response to changes in household debts, disposable income, and real estate. Only less 11 percent of households have participated in the stock market, and less than 0.4 percent have participated in the bond market. However, the participation rate is twice as high in fund markets than in stock markets. Financial debt chiefly results in impingement on financial market participation and is strongly pronounced, especially in fund markets. In contrast, real estate and disposable income tends to boost market participation, offsetting the effect of household debts. In fact, real estate increases household’s likelihood of participating in financial markets by 5 percent or more while an increase in disposable income increases by a range of at least 8 percent in liquid markets to 15.3 percent in fund markets, respectively.