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Social Interaction Effects and Individual Portfolio Choice: Evidence from 401(k) Pension Plan Investors
Keywords: 5 words maximum
Portfolio Choice; Peer Effect; 401(k)
Very short description for use in the program to help attendees understand more than a title can describe
401(k) participants are influenced by their coworkers when they make equity investment decisions. They are likely to increase (decrease) their risky share when they have lower (higher) equity exposure than their coworkers in the past period. The effect is especially strong when the difference of equity exposure is substantial. Furthermore, they are likely to increase equity exposure if they earned lower equity returns than their peers in the past period. Interaction of peer behavior and peer outcome influences investment decisions, inducing individuals with substantially lower equity exposure relative to peers increase more of risky share when peers earned higher returns.
Lead & Corresponding Author
Timothy (Jun) Lu, Peking University HSBC Business School
Job Title
Assistant Professor