Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229476 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8658
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We review an empirical literature that studies the role of social interactions in driving economic and financial decision making. We first summarize recent work that documents an important role of social interactions in explaining household decisions in housing and mortgage markets. This evidence shows, for example, that there are large peer effects in mortgage refinancing decisions and that individuals’ beliefs about the attractiveness of housing market investments are affected by the recent house price experiences of their friends. We also summarize the evidence that social interactions affect the stock market investments of both retail and professional investors as well as household financial decisions such as retirement savings, borrowing, and default. Along the way, we describe a number of easily accessible recent data sets for the study of social interactions in finance, including the “Social Connectedness Index,” which measures the frequency of Facebook friendship links across geographic regions. We conclude by outlining several promising directions for further research at the intersection of household finance and “social finance.”
Subjects: 
social networks
peer effects
financial decision making
social dynamics
belief contagion
Document Type: 
Working Paper
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