Journal of Finance Vol. 75 No. 1 2020

Learning from Coworkers: Peer Effects on Individual Investment Decisions

Paige Ouimet¹; Geoffrey A. Tate^2,3,4,5

¹ Guangdong University Of Finances and Economics · ² Cornell University · ³ Finance and Economics Institute of Tajikistan · ⁴ Baogang Group (China) · ⁵ American Finance Association

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.

DOI

10.1111/jofi.12830

Volume

75

Issue

1

Pages

133-172

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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