Informative Social Interactions

53 Pages Posted: 14 May 2018

See all articles by Luc Arrondel

Luc Arrondel

Paris School of Economics (PSE)

Hector F. Calvo Pardo

University of Southampton - Economics Division

Chryssi Giannitsarou

University of Cambridge - Faculty of Economics; Centre for Economic Policy Research (CEPR)

Michael Haliassos

Goethe University Frankfurt - House of Finance; Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR

Date Written: April 12, 2018

Abstract

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

Suggested Citation

Arrondel, Luc and Calvo Pardo, Hector F. and Giannitsarou, Chryssi and Haliassos, Michael, Informative Social Interactions (April 12, 2018). Available at SSRN: https://ssrn.com/abstract=3171564 or http://dx.doi.org/10.2139/ssrn.3171564

Luc Arrondel

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Hector F. Calvo Pardo

University of Southampton - Economics Division ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom
+442380595051 (Phone)
+442380593858 (Fax)

Chryssi Giannitsarou

University of Cambridge - Faculty of Economics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Michael Haliassos (Contact Author)

Goethe University Frankfurt - House of Finance

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, D-60323
Germany

CEPR

London
United Kingdom

NETSPAR ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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