Published Papers

Using data from a Twitter-like investor social platform, we document evidence consistent with self-enhancing transmission bias. We find investors are more likely to post about their better-performing stocks. Their followers are more likely to buy the posted stocks than other non-posted stocks. The effect of the postings on follow-up purchases is consistent with an attention-based interpretation: the postings bring the discussed stocks into the followers' choice set and increase their purchases. We also find that postings' effect on follow-up purchases is related to postings' perceived credibility. The performance-postings relationship is stronger among more volatile stocks and the relationship between postings and follow-up purchases is stronger among stocks with higher recent returns, shedding light on the spread of high-variance and extrapolative strategies. We also document that the social network features influential nodes.

We educate investors about the benefits of dividend reinvestment and costs of misperceiving dividends as free income. The intervention increases planned dividend reinvestment in survey responses. Using trading records, we observe a causal increase in dividend reinvestment in the field of roughly 50 cents for every euro received. This holds relative to investors' prior behavior and various control samples. Investors who learned the most from the intervention update their trading the most. The results suggest the free dividends fallacy is a significant source of dividend demand. Our study demonstrates that simple, targeted, and focused educational interventions can affect investment behavior.

We examine the effect of personal, two-way communication on the payment behavior of delinquent borrowers. Borrowers who speak with a randomly assigned bank agent are significantly more likely to successfully resolve the delinquency relative to borrowers who do not speak with a bank agent. Call characteristics related to the human touch of the call, such as the likeability of the agent's voice, significantly affect payment behavior. Borrowers who speak with a bank agent are also significantly less likely to become delinquent again. Our findings highlight the value of a human element in interactions between financial institutions and their customers.

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.