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Informative social interactions

Informative social interactions
Informative social interactions

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.

Household finance, Information networks, Peer effects, Portfolio choice, Subjective expectations
0167-2681
246-263
Arrondel, Luc
51a6cd5b-0df0-453f-b29e-09fd5dee03fa
Calvo-pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f
Giannitsarou, Chryssi
f2b54f93-23ca-4a61-a52a-3380cc223f5d
Haliassos, Michael
cc2bb5cb-d6ac-46cd-9e0f-91db10f17933
Arrondel, Luc
51a6cd5b-0df0-453f-b29e-09fd5dee03fa
Calvo-pardo, Hector
07a586f0-48ec-4049-932e-fb9fc575f59f
Giannitsarou, Chryssi
f2b54f93-23ca-4a61-a52a-3380cc223f5d
Haliassos, Michael
cc2bb5cb-d6ac-46cd-9e0f-91db10f17933

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

Identifiers

Local EPrints ID: 471317
URI: http://eprints.soton.ac.uk/id/eprint/471317
ISSN: 0167-2681
PURE UUID: 768badfd-72ea-4df6-a65e-84ac19d600ff
ORCID for Hector Calvo-pardo: ORCID iD orcid.org/0000-0001-6645-4273

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Date deposited: 02 Nov 2022 17:53
Last modified: 03 Nov 2022 02:40

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Contributors

Author: Luc Arrondel
Author: Chryssi Giannitsarou
Author: Michael Haliassos

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