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Understanding Peer Effects in Financial Decisions: Evidence from a Field ExperimentLeonardo BursztynUniversity of California, Los Angeles (UCLA) - Anderson School of Management Florian P. EdererUniversity of California, Los Angeles (UCLA) - Anderson School of Management; Yale School of Management Bruno FermanGeorge Washington University - School of Business Noam YuchtmanUniversity of California, Berkeley - Haas School of Business July 2012 NBER Working Paper No. w18241 Abstract: Using a high-stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ("social learning") and because his possession of the asset directly affects others' utility of owning the same asset ("social utility"). We find that both channels have statistically and economically significant effects on investment decisions. These results can help shed light on the mechanisms underlying herding behavior in financial markets. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Number of Pages in PDF File: 82 working papers seriesDate posted: July 21, 2012Suggested CitationContact Information
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