Social Interaction and Stock-Market Participation
48 Pages Posted: 28 Jun 2001 Last revised: 6 Apr 2022
There are 2 versions of this paper
Social Interaction and Stock Market Participation
Date Written: July 2001
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.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Geography of Investment: Informed Trading and Asset Prices
-
Social Interaction and Stock Market Participation
By Jeffrey D. Kubik, Harrison G. Hong, ...
-
Individual Investors and Local Bias
By Mark S. Seasholes and Ning Zhu
-
Thy Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers
By Jeffrey D. Kubik, Harrison G. Hong, ...
-
The Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trade of Money Managers
By Jeffrey D. Kubik, Harrison G. Hong, ...
-
Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices
By Esther Duflo and Emmanuel Saez
-
Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices
By Esther Duflo and Emmanuel Saez
-
The Local Bias of Individual Investors
By Ning Zhu
-
Advertising, Breadth of Ownership, and Liquidity
By Gustavo Grullon, George Kanatas, ...