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Peer performance and stock market entry

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  • Kaustia, Markku
  • Knüpfer, Samuli

Abstract

Peer performance can influence the adoption of financial innovations and investment styles. We present evidence of this type of social influence: recent stock returns that local peers experience affect an individual's stock market entry decision, particularly in areas with better opportunities for social learning. The likelihood of entry does not decrease as returns fall below zero, consistent with people not talking about decisions that have produced inferior outcomes. Market returns, media coverage, local stocks, omitted local variables, short sales constraints, and stock purchases within households do not seem to explain these results.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 104 (2012)
Issue (Month): 2 ()
Pages: 321-338

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Handle: RePEc:eee:jfinec:v:104:y:2012:i:2:p:321-338

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Investor behavior; Peer effect; Social interaction; Social influence; Stock market participation;

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Cited by:
  1. Kaustia, Markku & Knüpfer, Samuli & Torstila, Sami, 2013. "Stock ownership and political behavior: Evidence from demutualization," SAFE Working Paper Series 2, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  2. Tokuoka, Kiichi, 2013. "Saving response to unemployment of a sibling," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 58-75.
  3. Georgarakos, Dimitris & Haliassos, Michael & Pasini, Giacomo, 2012. "Household debt and social interactions," CFS Working Paper Series 2012/05, Center for Financial Studies (CFS).

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