Social Finance

Theresa Kuchler and Johannes Stroebel
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Theresa Kuchler: Leonard N. Stern School of Business, New York University, New York, NY 10012, USA

Annual Review of Financial Economics, 2021, vol. 13, issue 1, 37-55

Abstract: We review an empirical literature that studies the role of social interactions in driving economic and financial decision-making. We first summarize recent work that documents an important role of social interactions in explaining household decisions in housing and mortgage markets. This evidence shows, for example, that there are large peer effects in mortgage refinancing decisions and that individuals’ beliefs about the attractiveness of housing market investments are affected by the recent house price experiences of their friends. We also summarize recent work showing that social interactions affect the stock market investments of both retail and professional investors as well as household financial decisions such as retirement savings, borrowing, and default. Along the way, we describe a number of easily accessible recent data sets for the study of social interactions in finance, including the Social Connectedness Index, which measures the frequency of Facebook friendship links across geographies. We conclude by outlining several promising directions for further research in the field of social finance.

Keywords: social networks; peer effects; financial decision-making; social dynamics; belief contagion (search for similar items in EconPapers)
JEL-codes: B55 G11 G21 G23 G50 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Social Finance (2020)
Working Paper: Social Finance (2020)
Working Paper: Social Finance (2020)
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DOI: 10.1146/annurev-financial-101320-062446

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