Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment

82 Pages Posted: 21 Jul 2012  

Leonardo Bursztyn

University of California, Los Angeles (UCLA) - Anderson School of Management

Florian Ederer

Yale University - School of Management; Yale University - Cowles Foundation

Bruno Ferman

Sao Paulo School of Economics - FGV

Noam Yuchtman

University of California, Berkeley - Haas School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 2012

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.

Suggested Citation

Bursztyn, Leonardo and Ederer, Florian and Ferman, Bruno and Yuchtman, Noam, Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment (July 2012). NBER Working Paper No. w18241. Available at SSRN: https://ssrn.com/abstract=2114867

Leonardo Bursztyn (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Florian Ederer

Yale University - School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/florianederer/

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Bruno Ferman

Sao Paulo School of Economics - FGV ( email )

Rua Itapeva n 474
Sao Paulo, DC 01332-000 20052
Brazil

HOME PAGE: http://https://sites.google.com/site/brunoferman/

Noam Yuchtman

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Paper statistics

Downloads
9
Abstract Views
312