TY  - JOUR
AU  - Ivkovich,Zoran
AU  - Weisbenner,Scott
TI  - Information Diffusion Effects in Individual Investors' Common Stock Purchases Covet Thy Neighbors' Investment Choices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13201
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13201
L1  - http://www.nber.org/papers/w13201.pdf
N1  - Author contact info:
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

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  - We study the relation between households' stock purchases and stock purchases made by their neighbors. A ten percentage point increase in neighbors' purchases of stocks from an industry is associated with a two percentage point increase in households' own purchases of stocks from that industry. The effect is considerably larger for local stocks and among households in more social states. Controlling for area sociability, households' and neighbors' investment style preferences, and the industry composition of local firms, we attribute approximately one-quarter to one-half of the correlation between households' stock purchases and stock purchases made by their neighbors to word-of-mouth communication.
ER  -