Date of Award


Degree Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Prof. Xiangdong WEI

Second Advisor

Prof. Jesús SEADE


The emerging field of household finance, which studies the welfare benefits of financial markets for households and how effectively households use this market, is of significant importance for both academics and policy makers. However, studies in this new field remain scarce. Using data from a national representative survey that is unique for its combination of abundant household characteristics and heterogeneous individual preferences, attitudes and believes, and for its inclusion of investment behaviour and performances, this thesis pioneers a positive household finance study in developing countries by systematically investigating Chinese householders’ investments in the stock market. Moreover, this is the first study to regard the psychological concept of ‘trait anxiety’ (which refers to a person’s inherent propensity to feel anxious) as negatively associated with stock investment return performance.

This thesis comprises three main studies. In the first study, I investigate the reasons households participate in the stock market. I find that the evidence from China is systematically consistent with previous studies, which mainly focus on developed countries. That is, the poor and the less educated are less likely to hold equity in their final portfolios; and variables reflecting cost, constraint, preference and expectation play a statistically significant role in stock market participation. I also investigate the stock market participation problem from the new perspective of job satisfaction. Discontentment with one’s job, especially on job salary motivates stock investment activity. Satisfaction with hours of work and job stability boosts the probability of participation.

Individual investment performance plays an increasingly important role in household wealth accumulation and financial well-being. Then in the second study I examine the performance of the households that participate in the stock market. First, the evidence from China on this issue is also consistent with that from developed countries. Investors that are poor, less-educated and facing high information costs underperform significantly. Moreover, two so-called ‘investor mistakes’ also undermine stock investment outcomes in China. Second, I study investor performance form a new angle, preference for information screening with respect to resources, and find that investors who rely on their own analysis when making trading decisions earn more. These investors are usually wealthier, have more financial knowledge and are more likely to be male.

My third study further explores determinant of investment performance by identifying a more fundamental, intrinsic and stable heterogeneity that is embedded in human personality, i.e., trait anxiety, which reflects people’s innate propensity to feel anxious. I find that investors who are more prone to anxiety have significantly inferior investment performance in terms of stock market return rate, after controlling for many other relevant factors. This finding is robust across investment periods of both half a year and three years, and across regressions using different proxies for trait anxiety.

Recommended Citation

Huang, Z. (2013). A study of household finance in China (Doctoral dissertation, Lingnan University, Hong Kong). Retrieved from