Peer Pressure: Social Interaction and the Disposition Effect

Rawley Heimer

No 1618, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: Social interaction contributes to some traders? disposition effect. New data from an investment-specific social network linked to individual-level trading records builds evidence of this connection. To credibly estimate causal peer effects, I exploit the staggered entry of retail brokerages into partnerships with the social trading web platform and compare trader activity before and after exposure to these new social conditions. Access to the social network nearly doubles the magnitude of a trader?s disposition effect. Traders connected in the network develop correlated levels of the disposition effect, a finding that can be replicated using workhorse data from a large discount brokerage.

Keywords: social networks; Investments; Disposition Effect; Influence (search for similar items in EconPapers)
JEL-codes: G01 G11 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2016-07-14
New Economics Papers: this item is included in nep-soc and nep-ure
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Citations: View citations in EconPapers (69)

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