Peer effects in stock market participation: evidence from immigration

Anastasia Girshina, Thomas Mathä and Michael Ziegelmeyer

No 2340, Working Paper Series from European Central Bank

Abstract: This paper studies how peers’ financial behaviour affects individuals’ own investment choices. To identify the peer effect, we exploit the unique composition of the Luxembourg population and use the differences in stock market participation across various immigrant groups to study how they affect stock market participation of natives. We solve the reflection problem by instrumenting immigrants’ stock market participation with lagged participation rates in their countries of birth. We separate the peer effect from the contextual and correlated effects by controlling for neighbourhood and individual characteristics. We find that stock market participation of immigrant peers has sizeable effects on that of natives. We also provide evidence that social learning is one of the channels through which the peer effect is transmitted. However, social learning alone does not account for the entire effect and we conclude that social utility might also play an important role in peer effects transmission. JEL Classification: G5, D14, D83, G11, I22

Keywords: peer effects; social learning; social utility; stock market participation (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-mig, nep-soc, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Peer effects in stock market participation: Evidence from immigration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20192340

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