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Trading for Status

Harrison G. Hong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Wenxi Jiang

Yale University - School of Management

Na Wang

Hofstra University

Bin Zhao

Shanghai Advanced Institute of Finance; Shanghai Jiao Tong University (SJTU); China Academy of Financial Research (CAFR)

January 1, 2014

We show that Keeping-up-with-the-Jones preferences can explain several puzzling retail investor behaviors, including the excessive trading of small local stocks. Status concerns lead households, especially those living in affluent areas, to demand these stocks to track their neighbors' wealth. This demand varies pro-cyclically with the stock market's value and generates household trading. Using Chinese data on local stock turnover, stock message boards and brokerage account trading, we test and confirm this hypothesis by exploiting the uneven rise of affluence across Chinese provinces between 1998 and 2012.

Number of Pages in PDF File: 68

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Date posted: November 20, 2011 ; Last revised: January 8, 2014

Suggested Citation

Hong, Harrison G. and Jiang, Wenxi and Wang, Na and Zhao, Bin, Trading for Status (January 1, 2014). Available at SSRN: http://ssrn.com/abstract=1961833 or http://dx.doi.org/10.2139/ssrn.1961833

Contact Information

Harrison G. Hong (Contact Author)
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Wenxi Jiang
Yale University - School of Management ( email )
New Haven, CT 06520
United States
Na Wang
Hofstra University ( email )
Hempstead, NY 11549
United States
Bin Zhao
Shanghai Advanced Institute of Finance ( email )
211 West Huaihai Road
Shanghai, 200030
Shanghai Jiao Tong University (SJTU) ( email )
KoGuan Law School
Shanghai 200030, Shanghai 200052
China Academy of Financial Research (CAFR) ( email )
1954 Huashan Road
Shanghai P.R.China, 200030
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References:  34
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