Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228218
Authors: 
Girshina, Anastasia
Mathä, Thomas
Ziegelmeyer, Michael
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2340
Abstract: 
This paper studies how peers' financial behaviour affects individuals' own investment choices. To identify the peer effect, we exploit the unique composition of the Luxembourg population and use the differences in stock market participation across various immigrant groups to study how they affect stock market participation of natives. We solve the reflection problem by instrumenting immigrants' stock market participation with lagged participation rates in their countries of birth. We separate the peer effect from the contextual and correlated effects by controlling for neighbourhood and individual characteristics. We find that stock market participation of immigrant peers has sizeable effects on that of natives. We also provide evidence that social learning is one of the channels through which the peer effect is transmitted. However, social learning alone does not account for the entire effect and we conclude that social utility might also play an important role in peer effects transmission.
Subjects: 
peer effects
stock market participation
social utility
social learning
JEL: 
G5
D14
D83
G11
I22
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3971-3
Document Type: 
Working Paper

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