Author : Timothy (Jun) Lu
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Social Interaction Effects and Individual Portfolio Choice by : Timothy (Jun) Lu
Download or read book Social Interaction Effects and Individual Portfolio Choice written by Timothy (Jun) Lu and published by . This book was released on 2015 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that participants are influenced by their coworkers when they make equity investment decisions. Using a rich dataset of 401(k) plans, we find that individuals are likely to increase (decrease) their risky share when they have lower (higher) equity exposure than their coworkers in the last period. The effect is especially strong when the difference in equity exposure is substantial. Furthermore, individuals are likely to increase their equity exposure if they earn lower equity returns than their coworkers did in the last period. However, when their returns on equity are higher than their peers', they tend not to decrease their risky share. The interaction of peer behavior and peer outcome influences investment decisions, inducing individuals with substantially lower equity exposure than their coworkers to increase their risky share when coworkers also earned higher returns. Finally, we find that there exists heterogeneity in short-term excess returns following social interaction.