Peer Effects in Stock Trading : The Effect of Co-Workers, Family and Neighbors

This paper studies the effect of different social networks on investment decisions, and investigates how homophily and learning drive peer effect in financial decisions. Using unique data on co-workers, family, neighbors, and stock trading, I find that co-workers are the most influential peers, followed by family, whereas neighbors have no significant effect on stock trading. Examining mechanisms, I find that both homophily and learning have heterogeneous impacts depending on the social network. Overall, I show that the peer effect in trading is significant, differs between peer groups, and is driven by homophily and learning