Peer Effects in the Trading Decisions of Individual Investors |
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| Authors: | Lilian Ng Fei Wu |
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| Institution: | 1. Lilian Ng is the Hans Storr Professor of Finance at the Sheldon Lubar School of Business, University of Wisconsin at Milwaukee, Milwaukee, Wisconsin, USA.;2. Fei Wu is a Professor of Finance at CRACM, School of Finance and Statistics, Jiangxi University of Finance and Economics, Nanchang, China and Massey University, Palmerston North, New Zealand. |
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| Abstract: | This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word-of-mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city. |
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