Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment

Leonardo Bursztyn, Florian Ederer, Bruno Ferman and Noam Yuchtman

No 18241, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a high-stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ("social learning") and because his possession of the asset directly affects others' utility of owning the same asset ("social utility"). We find that both channels have statistically and economically significant effects on investment decisions. These results can help shed light on the mechanisms underlying herding behavior in financial markets.

JEL-codes: C93 D03 D14 D83 G0 G11 M31 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp, nep-hpe and nep-soc
Note: AP CF LS
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Citations: View citations in EconPapers (28)

Published as “Understanding Mechanisms Underlying Peer Effects: Evidence from a Field Experiment on Financial Decisions” (with Florian Ederer, Bruno Ferman, and Noam Yuchtman) Econometrica, 82(4): 1273-1301 (2014)

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Working Paper: Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment (2013)
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