Informative Social Interactions
53 Pages Posted: 14 May 2018
Date Written: April 12, 2018
We model informative social interactions within a large asset market, showing that they influence subjective expectations of future stock returns and directly the demand for stocks. We collect novel survey data from a representative French population sample, and we find that respondent perceptions of how informed or widely participating their peers are influence subjective expectations of stock returns solely through sharpening perceptions of past returns. Conditioning on expectations, stock market participation and the conditional portfolio share significantly increase with perceived peer stock market participation and information. Alongside informative social interactions, we also find some evidence of mindless imitation of peers.
Keywords: Information Networks; Social Interactions; Subjective Expectations; Peer Effects; Portfolio Choice
JEL Classification: D12; D83; D84; G11; C42
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