Bubble and inequality: The diffusion of stock ownership in the United States

The last fifteen years have been marked by important changes in the proportion of American households owning stocks. During the late 1990s financial bubble, a growing number of households entered the stock market; this evolution was partly reversed after 2001, as individual investors exited the stock market following the early 2000s stock market crash. This dissertation provides a sociological account of the transformations of household investing behaviors in a period of stock market bubble and their relationship to changes in inequality by analyzing the late 1990s financial bubble as a social diffusion process.;Chapter 2 traces the changes in the determinants of individual stock market participation from 1995 to 2007. As economic theory predicts, differences in attitudes towards financial risk explain why households participate in the stock market. But the decision to own stocks or trade frequently is also partly determined by social positions and financial risk-taking relies on stable economic dispositions. I show that, in the early stages of the financial bubble, the diffusion of economic practices such as investing and trading seemed consistent with network contagion effects. Moreover, younger, African American, and Hispanic households seemed more likely to invest in stocks while stock prices were soaring and reaching their peak. Chapter 3 attempts to explain the following puzzle: if stock ownership diffused, why did wealth inequality and the portion of inequality attributable to assets invested in stocks increase over this period? I show that the sequencing of investor entries into the market could account for major inequalities in investor return across sociodemographic groups: during the stock market bubble, later entrants were more likely to experience significant losses---even in the absence of differences in investing styles or skills. Chapter 4 offers a more detailed picture of the forms of stock ownership to which households were getting access, by focusing on the diffusion of employee equity. The results show that unlike individual stock ownership, the determinants of employee and 401(k) equity ownership remained stable throughout the bubble.