Beyond connectivity: stock market participation in a network
- What are the aggregate and distributional consequences of the relationship be-tween an individual’s social network and financial decisions? Motivated by several well-documented facts about the influence of social connections on financial decisions, we build and calibrate a model of stock market participation with a social network that emphasizes the interplay between connectivity and network structure. Since connections to informed agents help spread information, there is a pivotal role for factors that determine sorting among agents. An increase in the average number of connections raises the average participation rate, mostly due to richer agents. A higher degree of sorting benefits richer agents by creating clusters where information spreads more efficiently. We show empirical evidence consistent with the importance of connectivity and sorting. We discuss several new avenues for future research into the aggregate impact of peer effects in finance.
Author: | Olga BalakinaORCiD, Claes BäckmanORCiD, Anastasiia Parakhoniak |
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URN: | urn:nbn:de:hebis:30:3-715640 |
URL: | https://ssrn.com/abstract=4763145 |
DOI: | https://doi.org/10.2139/ssrn.4763145 |
Series (Serial Number): | SAFE working paper (416) |
Publisher: | SAFE |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2024 |
Year of first Publication: | 2024 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2024/04/16 |
Tag: | Connectivity; Homophily; Peer effects; Social networks; Stock Market Participation |
Edition: | March, 2024 |
Page Number: | 50 |
Note: | We gratefully acknowledge research support from the Leibniz Institute for Financial Research SAFE. |
HeBIS-PPN: | 518160947 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |