Abstract

http://ssrn.com/abstract=275432
 
 

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Social Interaction and Stock-Market Participation


Jeffrey D. Kubik


Syracuse University - Department of Economics

Harrison G. Hong


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

Jeremy C. Stein


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

July 2001

NBER Working Paper No. W8358

Abstract:     
We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given 'social' investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among 'non-socials'. It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households - defined as those who interact with their neighbors, or who attend church - are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.

Number of Pages in PDF File: 48

JEL Classification: G1,E4

working papers series





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Date posted: June 28, 2001  

Suggested Citation

Kubik, Jeffrey D. and Hong, Harrison G. and Stein, Jeremy C., Social Interaction and Stock-Market Participation (July 2001). NBER Working Paper No. W8358. Available at SSRN: http://ssrn.com/abstract=275432

Contact Information

Jeffrey D. Kubik
Syracuse University - Department of Economics ( email )
426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-9063 (Phone)
315-443-1081 (Fax)
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
Jeremy C. Stein
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-6455 (Phone)
617-496-7352 (Fax)
HOME PAGE: http://post.economics.harvard.edu/faculty/stein/stein.html
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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