Social Influence in the Housing Market

Carrie H. Pan and Christo A. Pirinsky

Journal of Financial and Quantitative Analysis, 2015, vol. 50, issue 4, 757-779

Abstract: We utilize the decennial U.S. Census to study social effects in housing consumption across 4 million households from 126 ethnic groups and 2,071 geographic locations in the United States. We find that the homeownership decisions within ethnic groups are locally correlated, after controlling for the homeownership rates within the group and the region. Social influence is stronger for younger, less educated, and lower-income individuals; immigrants; and Americans with ancestors from more unequal, uncertainty-avoiding, and collectivistic cultures. Our results suggest that both status and information considerations play an important role in the social comparison process in capital markets.

Date: 2015
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