from the St Louis Fed

Stock market participation varies widely by income, with higher-income families being more likely to own stocks. But what about by state? A recent article in The Regional Economist found that stock market participation varied across the country as well, even among households of similar incomes.

Senior Economist YiLi Chien and Senior Research Associate Paul Morris examined IRS individual income and tax data for 2014, the most recent year available.1 The initial finding was that the percent of households owning stocks indeed varied by state. The range of disparity was large: In Mississippi, only 10.5 percent of households were in the stock market, while 26.6 percent of households in Connecticut owned stocks.

Income Level and Stock Market Participation by State

“However, this is not the whole story,” Chien and Morris wrote. “Even when controlling for household income level, the large variation in participation across states prevails.”

The authors plotted participation rates for Connecticut, Mississippi and the U.S. as a whole across income levels. “The participation gap remains large for each group, indicating that household income level does not entirely lead to differences in participation rates.”

For example, the participation gap between Connecticut and Mississippi was 14.2 percentage points for the income group from $100,000 to just under $200,000. (To view the gaps at each income level, see The Regional Economist article, “stock market participation varied across the country.”)

Participation Rates across the Country

Chien and Morris noted that this pattern wasn’t limited to just the gap between the states with the highest and lowest participation. They plotted stock market participation rates for each state for households making from $100,000 up to but not including $200,000.

They found that five states had participation rates below 32.5 percent, while two states had participation rates of 45 percent and higher. The low was Utah at 30.7 percent, and the high was Vermont at 47.5 percent. (To see the variance across the country, see The Regional Economist article, “stock market participation varied across the country.”)