Peer Effects in Stock Market Participation : Evidence From Immigration

This paper studies how peers’ financial behaviour affects individuals’ own investment choices. To identify the peer effect, we exploit the composition of the Luxembourg population and use the differ-ences in stock market participation across various immigrant groups to study the effect on stock mar-ket participation of natives. We find that stock market participation of immigrant peers has sizeable effects on that of natives. Social learning is one of the channels for transmission of the peer effect. However, social learning alone does not account for the entire effect. Social utility might also play an important role in peer effects transmission