Learning from Coworkers: Peer Effects on Individual Investment Decisions |
| |
| Authors: | PAIGE OUIMET GEOFFREY TATE |
| |
| Institution: | 1. Paige Ouimet is at the Kenan-Flagler Business School, University of North Carolina. Geoffrey Tate is at the Robert H. Smith School of Business, University of Maryland. We thank Richard Freeman;2. Rawley Heimer;3. Stefan Nagel (Editor);4. Stephen Shore;5. Johannes Stroebel;6. Ed Van Wesep;7. two anonymous referees;8. conference participants at the 2019 American Finance Association Annual Meeting, 2018 Colorado Front Range Finance Seminar, 2018 CEAR-RSI Household Finance Workshop, 2018 Kelso workshop, 2018 China International Finance Conference, and Third Annual “Smokey” Mountain Finance Conference;9. and seminar participants at Cornell, Georgia State, Maryland, Notre Dame, Shanghai Institute of Advanced Finance, Tsinghua PBC, and Vanderbilt for helpful comments. We have read the Journal of Finance’s disclosure policy and have no conflict of interest to disclose. |
| |
| Abstract: | 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. |
| |
| Keywords: | |
|
|
