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Learning from Coworkers: Peer Effects on Individual Investment Decisions
Author(s) -
OUIMET PAIGE,
TATE GEOFFREY
Publication year - 2020
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12830
Subject(s) - stock (firearms) , peer effects , investment decisions , investment (military) , business , value (mathematics) , microeconomics , economics , finance , behavioral economics , psychology , computer science , social psychology , mechanical engineering , machine learning , engineering , politics , political science , law
Using unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees’ own decisions to participate and trade. Moreover, we find that the presence of high‐information employees magnifies the effects of peer networks. Given participation in an ESPP is value‐maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision‐making.