Social Interaction and Stock-Market Participation

Harrison Hong, Jeffrey David Kubik, Jeremy C. Stein

Research output: Contribution to journalArticle

510 Scopus citations

Abstract

We propose that stock-market participation is influenced by social interaction. In our model, any given "social" investor finds the market more attractive when more of his peers participate. We test this theory using data from the Health and Retirement Study, and find that social households - those who interact with their neighbors, or attend church - are substantially more likely to invest in the market than non-social households, controlling for wealth, race, education, and risk tolerance. Moreover, consistent with a peer-effects story, the impact of sociability is stronger in states where stock-market participation rates are higher.

Original languageEnglish (US)
Pages (from-to)137-163
Number of pages27
JournalJournal of Finance
Volume59
Issue number1
DOIs
StatePublished - Feb 2004

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ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

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