Social Interaction Intensity and Investor Behavior

Michael Gelman, David Hirshleifer, Yaron Levi and Liron Reiter-Gavish

No 32772, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document a causal effect of social interactions on investor behavior using the number of local soccer games as a measure of social interaction intensity. Social transmission is identifiable in buy but not sell trades. Social Interaction Intensity (SII) increases the sensitivity of buying to past buys, particularly in riskier stocks. This sensitivity is an increasing and convex function of past returns, with higher SII further amplifying the effect. Social interactions cause an extremity shift wherein existing shareholders increase their positions, especially within demographically homogeneous communities. Higher social interaction intensity increases the sensitivity of individual investors’ trading volume and portfolio riskiness to past trades. At the market level, SII increases the sensitivity of stock trading volume and retail ownership percentage to past buys.

JEL-codes: D14 D9 D91 G11 G12 G40 G5 G50 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-soc and nep-ure
Note: AP
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