Peer Effects in Stock Trading: The Effect of Co-Workers, Family and Neighbors

56 Pages Posted: 6 Apr 2022 Last revised: 4 Nov 2022

See all articles by Olga Balakina

Olga Balakina

Leibniz Institute for Financial Research SAFE

Date Written: April 25, 2022

Abstract

This paper studies the effect of different social networks on investment decisions, and investigates how homophily and learning drive peer effect in financial decisions. Using unique data on co-workers, family, neighbors, and stock trading, I find that co-workers are the most influential peers, followed by family, whereas neighbors have no significant effect on stock trading. Examining mechanisms, I find that both homophily and learning have heterogeneous impacts depending on the social network. Overall, I show that the peer effect in trading is significant, differs between peer groups, and is driven by homophily and learning.

Keywords: stock trading, peer effect, social networks, homophily, household finance

JEL Classification: D14, G11, G4

Suggested Citation

Balakina, Olga, Peer Effects in Stock Trading: The Effect of Co-Workers, Family and Neighbors (April 25, 2022). Available at SSRN: https://ssrn.com/abstract=4058371 or http://dx.doi.org/10.2139/ssrn.4058371

Olga Balakina (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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