Neighbors matter for risk tolerance

Jérémie Bertrand, Marie-Hélène Broihanne, Hava Orkut and Laurent Weill

The European Journal of Finance, 2025, vol. 31, issue 10, 1225-1244

Abstract: This paper examines the existence of peer effects in self-assessed financial risk tolerance in a real-world banking context. Using a large dataset of over 62,000 French retail bank clients, we investigate the relationship between the risk tolerance of a community and the risk tolerance of each individual residing in that community. Our analysis suggests that individuals tend to exhibit higher risk tolerance when their surrounding community does as well. This finding is further validated through robustness checks, including instrumental variable analysis and placebo tests. This evidence is consistent with the hypothesis of an assimilation peer effect in risk tolerance. Additionally, we observe that this peer effect increases with age and socialization, while it remains unaffected by gender differences.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:31:y:2025:i:10:p:1225-1244

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DOI: 10.1080/1351847X.2025.2473368

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