Peer Effects and Risk Sharing in Experimental Asset Markets

Paul Gortner and Joël van der Weele
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Paul Gortner: Bundesbank
Joël van der Weele: University of Amsterdam

No 19-027/I, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We investigate the effect of introducing information about peer portfolios in an experimental Arrow-Debreu economy. Confirming the prediction of a general equilibrium model with inequality averse preferences, we find that peer information leads to reduced variation in payoffs within peer groups. Information also improves risk sharing, as the data suggests that experiencing earnings deviations from peers induces a shift to more balanced portfolios. In a treatment where we highlight the highest earner, we observe a reduction in risk sharing, while highlighting the lowest earner has no effects compared to providing neutral information. Our results indicate that the presence of social information and its framing is an important determinant of equilibrium in financial markets.

Keywords: peer effects; laboratory experiments; risk taking; asset markets (search for similar items in EconPapers)
JEL-codes: C92 D53 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20190027

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