Exposure to Bankers: Networks and Stock Market Participation

31 Pages Posted: 23 May 2016

See all articles by Arian Borgers

Arian Borgers

Maastricht University

Rachel A.J. Pownall

Tilburg University - Department of Finance; Maastricht University - Department of Finance

Louis Raes

Tilburg University; Tilburg University - European Banking Center

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2015

Abstract

In this paper we investigate the importance of acquaintance networks for financial decisions by households. We construct a variable capturing the expected proximity or social closeness to a subpopulation of financially savvy people using an overdispersed Poisson model. This measure captures the exposure to people with financial knowledge in an investor's acquaintance network. We find that investors with a higher exposure to financial savvy people are more likely to invest in stocks. This holds after controlling for a wide range of known stock market participation determinants. Moreover when restricting to households with elevated levels of trust or wealth the impact of exposure to financial savvy people increases. Our main findings continue to hold in several analyses to uncover an exogenous effect from proximity on stock market participation. Furthermore we show that the importance of acquaintance networks extends to other financial decisions as well.

Keywords: Social Networks, Household Finance, Stock market Participation, Retirement Planning

JEL Classification: G1, E2, D8

Suggested Citation

Borgers, Arian and Pownall, Rachel Ann Jane and Raes, Louis, Exposure to Bankers: Networks and Stock Market Participation (October 1, 2015). Available at SSRN: https://ssrn.com/abstract=2783360 or http://dx.doi.org/10.2139/ssrn.2783360

Arian Borgers

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Rachel Ann Jane Pownall

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Louis Raes (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

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