Peer Effects in Risk Aversion and Trust
Kenneth Ahern (),
Ran Duchin and
Review of Financial Studies, 2014, vol. 27, issue 11, 3213-3240
Existing evidence shows that risk aversion and trust are largely determined by environmental factors. We test whether one such factor is peer influence. Using random assignment of MBA students to peer groups and predetermined survey responses of economic attitudes, we find causal evidence of positive peer effects in risk aversion and no effects in trust. After the first year of the MBA program, the difference between an individual and her peers' average risk aversion has shrunk by 41%. Finding no peer effects in trust is consistent with recent research showing that distinct cognitive processes govern risk aversion and trust.
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