Exposure to bankers: Networks and Stock Market Participation

Arian Borgers, Rachel Pownall, L. Raes

Research output: Working paper / PreprintWorking paper

Abstract

In this paper we investigate the importance of acquaintance networks for financial decisions by households. We construct a variable capturing the expected proximity or social closeness to a subpopulation of financially savvy people using an overdispersed Poisson model. This measure captures the exposure to people with financial knowledge in an investor's acquaintance network. We find that investors with a higher exposure to financial savvy people are more likely to invest in stocks. This holds after controlling for a wide range of known stock market participation determinants. Moreover when restricting to households with elevated levels of trust or wealth the impact of exposure to financial savvy people increases. Our main findings continue to hold in several analyses to uncover an exogenous effect from proximity on stock market participation. Furthermore we show that the importance of acquaintance networks extends to other financial decisions as well.
Original languageEnglish
PublisherSSRN
Number of pages31
DOIs
Publication statusPublished - 2017

Publication series

SeriesSSRN Working Paper Series
Number2783360

JEL classifications

  • g10 - General Financial Markets: General (includes Measurement and Data)
  • e20 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
  • d80 - Information, Knowledge, and Uncertainty: General

Keywords

  • social networks
  • household finance
  • stock market participation
  • retirement planning

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