TY  - JOUR
AU  - Brown,Jeffrey R.
AU  - Ivkovich,Zoran
AU  - Smith,Paul A.
AU  - Weisbenner,Scott
TI  - Neighbors Matter: Causal Community Effects and Stock Market Participation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13168
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13168
L1  - http://www.nber.org/papers/w13168.pdf
N1  - Author contact info:
Jeffrey R. Brown
Department of Finance
University of Illinois at Urbana-Champaign
515 East Gregory Drive
Champaign, IL 61820
Tel: 217/333-3322
E-Mail: brownjr@illinois.edu

Zoran Ivkovich
Department of Finance
Michigan State University
315 Eppley Center
East Lansing, MI 48824
Tel: (517) 353-4593
E-Mail: ivkovich@bus.msu.edu

Paul A. Smith
Federal Reserve Board of Governors
Washington, DC 20551
E-Mail: Paul.A.Smith@frb.gov

Scott Weisbenner
University of Illinois at Urbana-Champaign
Department of Finance
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820
Tel: 217/333-0872
Fax: 217/244-9867
E-Mail: weisbenn@illinois.edu
AB  - This paper establishes a causal relation between an individual's decision of whether to own stocks and average stock market participation decision of the individual's community. We instrument for the average ownership of an individual's community with lagged average ownership of the states in which one's non-native neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-by-year effects, rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities.
ER  -