Informative social interactions

Arrondel, Luc, Calvo-pardo, Hector, Giannitsarou, Chryssi and Haliassos, Michael (2022) Informative social interactions. Journal of Economic Behavior & Organization, 203, 246-263. (doi:10.1016/j.jebo.2022.09.006).

Record type: Article

Abstract

Household finances are confidential and discussions are limited to a subset of peers. We collect novel representative survey data to examine separately whether interactions with inner and outer social circles influence return perceptions, expectations, and exposure to a widely known financial instrument in a developed economy with multiple information sources. We find that a respondent's connectedness, proxied by perceived prevalence of information or participation in the small financial circle, improves expectation accuracy indirectly, through boosting accuracy of perceived past returns; and influences stock participation and exposure not only by influencing expectations, but also directly.

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Accepted/In Press date: 6 September 2022

e-pub ahead of print date: 23 September 2022

Published date: November 2022

Additional Information: Funding Information: ☆ We thank the Editor, the Associate Editor, and two referees for very constructive comments. We are grateful to the Keynes Fund, Authorité pour les Marchés Financiers, the Cambridge Endowment for Research in Finance, the Fondation Institut Europlace de Finance, project ANR 11-LABX-0019, CEPREMAP Foundation and the German Research Foundation for funding different aspects of this challenging research project. Declarations of interest: none. For useful discussions we thank Klaus Adam, Debopam Bhattacharya, Olympia Bover, Antonio Cabrales, Chris Carroll, Vasco Carvalho, Jagjit Chadha, Giancarlo Corsetti, Arun Chandrasekhar, Pierre Dubois, Matt Elliott, George Evans, Thierry Foucault, Edo Gallo, Stephane Gallon, Pam Giustinelli, Sanjeev Goyal, Hamish Low, Charles Manski, Brendon McConnell, Stephen Morris, Kaivan Munshi, Matthew Olckers, Xisco Oliver, Stefan Pichler, Ricardo Reis, Johannes Stroebel, Jean-Marc Tallon, Giorgio Topa, Artur Van Soest, Nora Wegner, Basit Zafar and Yves Zenou. We also thank seminar and conference participants at Authorité pour les Marchés Financiers, University of Cambridge, UIB, Banque de France Research Foundation, NIESR, PSE behavioral Seminar, the joint ESRC NIESR Warwick and Bank of England workshop, Institut Louis Bachelier 10th Financial Risks International Forum, Judge Business School, ETH Zurich, Universita Catolica di Milano, CBID Workshop at Durham, ASSA-AEA session on ‘Subjective expectations, belief formation and economic behavior’, EEA, CEF, RES, ESEM, and SED meetings. Thanks aslo go to Joel Flynn, Sandeep Vijayakumar and Johannes Wohlfart for outstanding research assistance. Funding Information: We thank the Editor, the Associate Editor, and two referees for very constructive comments. We are grateful to the Keynes Fund, Authorité pour les Marchés Financiers, the Cambridge Endowment for Research in Finance, the Fondation Institut Europlace de Finance, project ANR 11-LABX-0019, CEPREMAP Foundation and the German Research Foundation for funding different aspects of this challenging research project. Declarations of interest: none. For useful discussions we thank Klaus Adam, Debopam Bhattacharya, Olympia Bover, Antonio Cabrales, Chris Carroll, Vasco Carvalho, Jagjit Chadha, Giancarlo Corsetti, Arun Chandrasekhar, Pierre Dubois, Matt Elliott, George Evans, Thierry Foucault, Edo Gallo, Stephane Gallon, Pam Giustinelli, Sanjeev Goyal, Hamish Low, Charles Manski, Brendon McConnell, Stephen Morris, Kaivan Munshi, Matthew Olckers, Xisco Oliver, Stefan Pichler, Ricardo Reis, Johannes Stroebel, Jean-Marc Tallon, Giorgio Topa, Artur Van Soest, Nora Wegner, Basit Zafar and Yves Zenou. We also thank seminar and conference participants at Authorité pour les Marchés Financiers, University of Cambridge, UIB, Banque de France Research Foundation, NIESR, PSE behavioral Seminar, the joint ESRC NIESR Warwick and Bank of England workshop, Institut Louis Bachelier 10th Financial Risks International Forum, Judge Business School, ETH Zurich, Universita Catolica di Milano, CBID Workshop at Durham, ASSA-AEA session on ‘Subjective expectations, belief formation and economic behavior’, EEA, CEF, RES, ESEM, and SED meetings. Thanks aslo go to Joel Flynn, Sandeep Vijayakumar and Johannes Wohlfart for outstanding research assistance. Publisher Copyright: © 2022 The Authors

Keywords: Household finance, Information networks, Peer effects, Portfolio choice, Subjective expectations