Consumer Margin Use: Understanding the Role of Peer Influence, Investment Literacy, and Age

Very little has been observed regarding household decisions around margin use. Using the 2021 wave of the National Financial Capability Study (NFCS), this study investigates margin use as both a debt and an investment decision. Using probit analysis and observing correlations, relationships between peer influence, investment literacy, age, and margin use are explored. Results indicate a positive peer influence on the decision to buy on margin. Also, younger individuals and individuals with higher degrees of investment literacy have a higher probability of buying on margin. Finally, feelings of over indebtedness are positively related to margin use. These findings have implications for policy makers as well as those who provide financial advice.