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Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment

  • Noam Yuchtman

    (UC Berkeley)

  • Florian Ederer

    (UCLA)

  • Bruno Ferman

    (The George Washington University)

  • Leonardo Bursztyn

    (UCLA)

Using a high-stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ("social learning") and because his possession of the asset directly affects others' utility of owning the same asset ("social utility"). We find that both channels have statistically and economically significant effects on investment decisions. These results can help shed light on the mechanisms underlying herding behavior in financial markets.

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File URL: https://economicdynamics.org/meetpapers/2013/paper_222.pdf
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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 222.

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Date of creation: 2013
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Handle: RePEc:red:sed013:222
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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