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Peer Effects in Risk Aversion and Trust

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Listed:
  • Kenneth R. Ahern
  • Ran Duchin
  • Tyler Shumway

Abstract

Existing evidence shows that risk aversion and trust are largely determined by environmental factors. We test whether one such factor is peer influence. Using random assignment of MBA students to peer groups and predetermined survey responses of economic attitudes, we find causal evidence of positive peer effects in risk aversion and no effects in trust. After the first year of the MBA program, the difference between an individual and her peers' average risk aversion has shrunk by 41%. Finding no peer effects in trust is consistent with recent research showing that distinct cognitive processes govern risk aversion and trust.

Suggested Citation

  • Kenneth R. Ahern & Ran Duchin & Tyler Shumway, 2014. "Peer Effects in Risk Aversion and Trust," The Review of Financial Studies, Society for Financial Studies, vol. 27(11), pages 3213-3240.
    • Handle: RePEc:oup:rfinst:v:27:y:2014:i:11:p:3213-3240.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhu042
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