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An information cascade is a situation in which an agent who observes others chooses the same action irrespective of the value of the agent's private information signal. Theoretical models have found that cascades result in poor information aggregation, inaccurate decisions, and fragility of mass...
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Individual investors often invest actively and lose thereby. Social interaction seems to exacerbate this tendency. In our model, senders' propensity to discuss their strategies' returns, and receivers' propensity to be converted, are increasing in sender return. A distinctive implication is that...
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Using friendship data from Facebook, we study the effects of three aspects of social capital on household financial behavior. We find that the most important measure of social capital in explaining stock market and saving participation is Economic Connectedness, defined as the fraction of one's...
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We study how the social transmission of public news influences investors' beliefs and securities markets. Using an extensive dataset to measure investor social networks, we find that earnings announcements from firms in higher-centrality locations generate stronger immediate price and trading...
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Evolved dispositions influence, but do not determine, how people think about economic problems. The evolutionary cognitive approach offers important insights, but underweights the social transmission of ideas as a level of explanation. The need for a social explanation for the evolution of...
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