Social Interaction and Stock Market Participation

TitleSocial Interaction and Stock Market Participation
Publication TypeJournal Article
Year of Publication2004
AuthorsHong, H, Kubik, JD, Stein, JC
JournalJournal of Finance
Volume59
Issue1
Pagination137-163
KeywordsHealth Conditions and Status, Net Worth and Assets
Abstract

We propose that stock-market participation is influenced by social interaction. In our model, any given social investor finds the market more attractive when more of his peers participate. We test this theory using data from the Health and Retirement Study, and find that social households those who interact with their neighbors, or attend church are substantially more likely to invest in the market than non-social households, controlling for 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.

URLhttp://www.nber.org/papers/w8358
Endnote Keywords

Stock Market/Social Interaction

Endnote ID

6611

Citation Key6905