Peer Effects in the Trading Decisions of Individual Investors

Lilian Ng and Fei Wu

Financial Management, 2010, vol. 39, issue 2, 807-831

Abstract: This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word‐of‐mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city.

Date: 2010
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