Working Paper: CEPR ID: DP9837
Authors: Hans K. Hvide; Per Stberg
Abstract: Stock market investment decisions of individuals are positively correlated with that of co-workers. Sorting of unobservably similar individuals to the same workplaces is unlikely to explain our results, as evidenced by the investment behavior of individuals that move between plants. Purchases made under stronger co-worker purchase activity are not associated with higher returns. Moreover, social interaction appears to drive the purchase of within-industry stocks; an investment mistake. Overall, our results suggest a strong influence of co-workers on investment choices, but not an influence that improves the quality of investment decisions.
Keywords: individual investors; investment decisions; peer effect; social interaction; stock selection
JEL Codes: G02; G11; J00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stronger coworker pressure (C92) | Quality of investment choices (G11) |
| Fraction of coworkers making a purchase in a given month (D26) | Probability of an individual making a purchase (C69) |
| Fraction of coworkers purchasing a particular stock (G41) | Fraction of that month's purchases allocated to the same stock (G12) |