NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Social Interaction and Stock-Market Participation

Harrison Hong, Jeffrey D. Kubik, Jeremy C. Stein

NBER Working Paper No. 8358
Issued in July 2001
NBER Program(s):   AP   CF

We investigate the idea that stock-market participation is influenced by social interaction. We build a simple model in which any given 'social' investor finds it more attractive to invest in the market when the participation rate among his peers is higher. The model predicts higher participation rates among social investors than among 'non-socials'. It also admits the possibility of multiple social equilibria. We then test the theory using data from the Health and Retirement Study. Social households - defined as those who interact with their neighbors, or who attend church - are indeed substantially more likely to invest in the stock market than non-social households, controlling for other factors like wealth, race, education and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.

download in pdf format
   (266 K)

email paper

This paper is available as PDF (266 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8358

Published: Hong, Harrison, Jeffrey D. Kubik and Jeremy C. Stein. "Social Interaction And Stock-Market Participation," Journal of Finance, 2004, v59(1,Feb), 137-163. citation courtesy of

Users who downloaded this paper also downloaded these:
van Rooij, Lusardi, and Alessie w13565 Financial Literacy and Stock Market Participation
Guiso, Sapienza, and Zingales w11648 Trusting the Stock Market
Hong, Kubik, and Stein w9711 The Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trade of Money Managers
Brown, Ivkovich, Smith, and Weisbenner w13168 Neighbors Matter: Causal Community Effects and Stock Market Participation
Brown, Ivkovich, Smith, and Weisbenner w10235 The Geography of Stock Market Participation: The Influence of Communities and Local Firms
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us