Author: Hongwu Gan, Shengfeng Lu, Weijie Lu, Geng Niu, Yang Zhou

Abstract: This paper investigates whether beauty, an important natural endowment, affects investment decisions. Using data from the Wisconsin Longitudinal Survey (WLS), which provides a photo-based measure of facial beauty, we find that better-looking individuals are more likely to own stocks and invest a larger share of wealth in stocks. We consider a wide range of potential mediators that may drive this relationship between beauty and stock market participation. We find that income and sociability explain a large portion of the beauty effect. For both males and females, beauty has a significant positive impact on stock market participation. Using another dataset that includes the interviewer’s rating of the respondent’s physical attractiveness, we find similar results. Our study contributes to a better understanding of the economic returns to beauty and the source of heterogeneity in household portfolio choice.

Keywords: Beauty; Facial attractiveness; Stock market participation; Mediation analysis.

The article was published online in the "Journal of Banking and Finance" in September 2023, which is a Level B+ reward journal in the academic journal ranking scheme of the Economics and Management School of Wuhan University. The authors are listed in alphabetical order by last name, with Zhou Yang as the corresponding author.

Link: https://doi.org/10.1016/j.jbankfin.2023.106994