Personal Recommendations and Portfolio Quality

64 Pages Posted: 18 Jul 2022 Last revised: 14 Nov 2023

See all articles by Olga Balakina

Olga Balakina

Leibniz Institute for Financial Research SAFE

Claes Bäckman

Leibniz Institute for Financial Research SAFE

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Tobin Hanspal

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

Dominique Lammer

affiliation not provided to SSRN

Date Written: June 01, 2023

Abstract

Social interactions in finance can lead to better financial outcomes or help propagate financial mistakes. We develop a framework that incorporates two views of social interaction and provide empirical evidence of their relevance in a setting where individuals are personally connected with stronger ties than in an online community. Providing and accepting advice is positively related to portfolio quality but is not driven by high returns. Funds are more likely to be recommended than lottery or attention stocks, leading to increases in portfolio quality. Our evidence suggests that social networks can provide good advice in settings where individuals are personally connected.

Keywords: Social finance, portfolio choice, investment behavior, peer effects, household finance

JEL Classification: D14, G11, G40, G50

Suggested Citation

Balakina, Olga and Bäckman, Claes and Hackethal, Andreas and Hanspal, Tobin and Lammer, Dominique, Personal Recommendations and Portfolio Quality (June 01, 2023). SAFE Working Paper No. 353, Available at SSRN: https://ssrn.com/abstract=4150243 or http://dx.doi.org/10.2139/ssrn.4150243

Olga Balakina

Leibniz Institute for Financial Research SAFE ( email )

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

Claes Bäckman

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Andreas Hackethal

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

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

Leibniz Institute for Financial Research SAFE ( email )

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

Tobin Hanspal (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Dominique Lammer

affiliation not provided to SSRN

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