Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/262210 
Year of Publication: 
2022
Series/Report no.: 
SAFE Working Paper No. 353
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
Peer effects can lead to better financial outcomes or help propagate financial mistakes across social networks. Using unique data on peer relationships and portfolio composition, we show considerable overlap in investment portfolios when an investor recommends their brokerage to a peer. We argue that this is strong evidence of peer effects and show that peer effects lead to better portfolio quality. Peers become more likely to invest in funds when their recommenders also invest, improving portfolio diversification compared to the average investor and various placebo counterfactuals. Our evidence suggests that social networks can provide good advice in settings where individuals are personally connected.
Subjects: 
Household finance
investment decisions
investment behavior
peer effects
social networks
JEL: 
D14
G11
G4
Document Type: 
Working Paper

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