Document Type

Article

Date

6-2001

Keywords

tbd

Disciplines

Economics

Description/Abstract

We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given "social" investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among "non-socials". It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households-defined as those who interact with their neighbors, or who attend church-are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.

Additional Information

This manuscript is from the Social Science Research Network, for more information see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=274077#193443

Source

Harvested from ssrn.com

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