Peer Pressure: Social Interaction and the Disposition Effect

Review of Financial Studies, Forthcoming

74 Pages Posted: 2 Nov 2014 Last revised: 28 Apr 2016

See all articles by Rawley Heimer

Rawley Heimer

Boston College - Department of Finance

Date Written: April 27, 2016


Social interaction contributes to some traders' disposition effect. New data from an investment-specific social network linked to individual-level trading records builds evidence of this connection. To credibly estimate causal peer effects, I exploit the staggered entry of retail brokerages into partnerships with the social trading web-platform and compare trader activity before and after exposure to these new social conditions. Access to the social network nearly doubles the magnitude of a trader's disposition effect. Traders connected in the network develop correlated levels of the disposition effect, a finding that can be replicated using workhorse data from a large discount brokerage.

Keywords: Individual Investors, Disposition Effect, Behavioral Biases, Social Networks, Causal Peer Effects

Suggested Citation

Heimer, Rawley, Peer Pressure: Social Interaction and the Disposition Effect (April 27, 2016). Review of Financial Studies, Forthcoming, Available at SSRN: or

Rawley Heimer (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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