Stock Market Participation: When No Priming Works Best

Typically, individuals tend to under-invest in financial markets. Meanwhile, financial market participation always takes place with some form of nudging, which can particularly be introduced as priming of potential clients. Through a survey of 2107 individuals from 5 European countries, we show that, in line with the somatic marker hypothesis, priming significantly reduces participation in the stock market for individuals who fail to be emotionally moved while significantly increasing stock market participation for those who feel strong emotions due to this priming. Moreover, emotions and financial literacy interact so that less financially literate investors typically participate more in financial markets when they are impacted by emotions compared to highly financially literate investors. In terms of managerial implication, the results testify to the need for targeted priming of individuals.