Do the Rich Get Richer in the Stock Market? Evidence from India
We use data on Indian stock portfolios to show that return heterogeneity is the primary contributor to increasing inequality of wealth held in risky assets by Indian individual investors. Return heterogeneity increases equity wealth inequality through two main channels, both of which are related to the prevalence of undiversified accounts that own relatively few stocks. First, some undiversified portfolios randomly do well, while others randomly do poorly. Second, larger accounts diversify more effectively and thereby earn higher average log returns even though their average simple returns are no higher than those of smaller accounts.
We gratefully acknowledge NSDL and SEBI for providing us with access to the data, the Sloan Foundation for financial support, and Imperial College for the use of computing facilities. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
John Y. Campbell
John Y. Campbell & Tarun Ramadorai & Benjamin Ranish, 2019. "Do the Rich Get Richer in the Stock Market? Evidence from India," American Economic Review: Insights, vol 1(2), pages 225-240. citation courtesy of