Published Papers

We study the influence from social interactions on equity trading. Using unique data on stock transactions, we exploit the quasi-random assignment of students to classrooms in a financial training program to identify how peer experience affects investor behavior. We find that individuals react more to peer gains than to peer losses. Students enrolled in courses where peers have positive outcomes: (i) are more likely to start trading, (ii) purchase similar stocks as their classmates, and (iii) are disproportionally attracted to stocks with extreme returns. These stocks have low subsequent returns, and new investors reacting to peer gains underperform other investors.

We study the role of social networks in hedge fund activism. Actively managed funds whose managers are socially connected to activists are more likely than unconnected managers to invest in target stocks; their investment decisions are profitable. Importantly, such effects are greater for funds facing more severe information asymmetry. Connected funds are 14.2 percentage points more likely to support activists in proxy contests and contribute to reducing proxy contest costs. Our evidence shows that social ties benefit both connected investors and activists, and suggests that social networks reduce information asymmetry around activist campaigns by facilitating information exchange and increasing trust.