Trusting the stock market

We provide a new explanation to the limited stock market participation puzzle. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function not only of the objective characteristics of the stock, but also of the subjective characteristics of the investor. Less trusting individuals are less likely to buy stock and, conditional on buying stock, they will buy less. The calibration of the model shows that this problem is sufficiently severe to account for the lack of participation of some of the richest investors in the United States as well as for differences in the rate of participation across countries. We also find evidence consistent with these propositions in Dutch and Italian micro data, as well as in cross country data. Klassifikation: D1, D

Does local financial development matter?

We study the effects of differences in local financial development within an integrated financial market. We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator, we find that financial development enhances the probability an individual starts his own business, favors entry of new firms, increases competition, and promotes growth. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. These effects are present even when we instrument our indicator with the structure of the local banking markets in 1936, which, because of regulatory reasons, affected the supply of credit in the following 50 years. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements

X-Ray Afterglows of Gamma-Ray Bursts

The afterglow emission has become the main stream of Gamma-Ray burst research since its discovery three years ago. With the distance-scale enigma solved, the study of the late-time GRB emission is now the most promising approach to disclose the origin of these explosions and their relationship with the environment of the host galaxy in the early phase of the Universe. In this contribution I will review X-ray observations and their implication on our undertstanding on the GRB phenomenon. These measurements are providing a direct probe into the nature of the progenitor and a measurement of the GRB beaming properties, crucial to establish the total energy output. Some evidence of iron lines connects the GRB explosion with massive progenitors, thence with star-forming regions. Furthermore a comparison of the spectral properties with the temporal evolution indicates that the fireball expansion should not be - on average - highly collimated, with a jet angle $>10 \deg$.Comment: 14 pages, 8 figures, Proc.s. of "X-Ray Astronomy '99:Stellar Endpoints, AGN and the Diffuse X-ray Background", September 6-10, 1999, CNR Bologn