Anecdotal evidence suggests that investor protection affects the demand for equity, but existing theories emphasize only the effect of investor protection on the supply of equity. We build a model showing that the demand for equity is important in explaining financial development. If the level...

The well-known equity home bias has two components: an extensive and intensive margin. Using U.S. household portfolio data, we find that the decision to participate in foreign stock markets depends on investor's wealth, with richer investors more likely to participate (the extensive margin). We...