Search

In 2020, there were simultaneous increases in the number of private persons participating on the stock market as well as in the number of employees working from home. Indeed, working from home is a robust determinant of stock ownership and partially explains the increase in 2020, with households without children benefiting the most in this manner. Furthermore, the effect of working from home on stock ownership is largest for low-income earners. Thus, working more from home has complex distributional consequences: It tends to expand the stock owner base by, in a broader sense, decreasing the stock market participation cost. While economic policy should not mandate working from home for the sole purpose of increasing stock ownership, it can facilitate stock market participation in other ways, such as by improving financial education., DIW Weekly Report

We study the multifaceted effects and persistence of trade policy shocks on financial markets in a structural vector autoregression. The model is identified via event day heteroskedasticity. We find that restrictive US trade policy shocks affect US and international stock prices heterogeneously, but generally negatively overall, increasing market uncertainty, lowering interest rates, and leading to an appreciation of the US-Dollar. The effects are significant for several weeks or quarters. These effects reveal elements of both relative price shocks and uncertainty shocks of which the latter may be more important. Chinese trade policy shocks against the US further hurt US stocks.

The consumer debt of households in Germany totals in the triple-digit billions and is characterized by a wide range of interest rates. Despite the high volume of debt, many people do not know the terms of their consumer credit contracts. This report analyzes new survey data on general knowledge about typical forms of consumer credit, such as the overdraft facility and consumer loans. Women tend to know less about the interests they pay and are less financially literate. Financial literacy correlates with being informed about interest rates, but is independent of the incidence of consumer debt in general. An experiment reveals respondents are fundamentally price sensitive and that cost display influences the decision to take out consumer credit. For example, there is a significantly higher willingness to take out a consumer loan when the costs are presented per month in euros compared to per year. Consumer protection in financial services should examine these effects, consider them in an evidence-based manner where appropriate, and adjust information disclosure requirements, especially for the overdraft facility. The research findings also support implementing more financial literacy initiatives, especially for women., DIW Weekly Report

We study the malleability of patience via educational interventions by aggregating evidence from earlier experiments in a meta-analysis and by conducting a field experiment. We find that the average effect of interventions on patience is positive but uncertain. The age of students explains a large share of between-study heterogeneity in treatment effects. Thus, we conduct a field experiment covering both youths and adults in Uganda. We find heterogenous effects by age: adults’ patience measured in incentivized tasks is unaffected by the intervention after 15 months follow-up, but we observe large effects on patience and estimated discount factors for youth.

Over 90 percent of Germany’s raw materials supply is imported and many of these imports come from only a small handful of producer countries. Often, these producer countries tend to be less democratic. In this respect, supply risks are extremely high in some cases, including for mineral raw materials such as rare-earth elements, lithium, and magnesium. To increase raw material import security of supply, various economic policies can be undertaken. European customers could bundle their procurement of raw materials to counter the market power of the few suppliers and more diversification potentials in imports could be used. Raw material storage should also be reconsidered and supplemented by a mandatory minimum reserve. In the long term, raw material imports can be reduced by recycling more and expanding domestic mineral raw material production. Finally, technical innovations should be initiated to replace raw material imports. These measures should be coordinated at a European level as much as possible., DIW Weekly Report

We present evidence from a repeated survey on risky asset holdings carried out on a representative sample of the German population six times between April and June 2020. Given the size of the Covid‐19 shock, we find little evidence of portfolio rebalancing in April 2020. In May, however, individual investors started buying heavily, parallel to market recovery. The cross‐section shows large differences as young, educated, high income, and risk tolerant investors are net buyers throughout and, thus, benefit from the stock market recovery. Older individuals, parents of young children, and individuals affected by adverse liquidity shocks from Covid‐19 are net sellers. Given the high risk of illness, older people are hit by dual blows to both health and finances.