Religious differences and households' investment decisions

Abstract

This study examines effects of religion on US households' investment decisions, with focusing on the two channels; individual religious belief and local religious culture. We find that Protestants are less likely to invest in stocks than nonreligious households. Catholics are more likely to participate in stock markets than nonreligious households, which is largely driven by Catholic households' greater wealth and older age. Moreover, a higher local Catholic-Protestant ratio (CPratio) is associated with greater stock market participation of the local households, regardless of their own religious preferences. Furthermore, we find that the local CPratio is associated with stock choices-the higher the CPratio, the riskier the stock portfolios. The findings are economically meaningful and they provide salient insights into theory and policy.