Published Papers

An informational cascade occurs when it is optimal for an individual, having observed the actions of those ahead of him, to follow the behavior of the preceding individual without regard to his own information. We argue that localized conformity of behavior and the fragility of mass behaviors can be explained by informational cascades.

We find that socially connected fund managers have more similar holdings and trades. The overlap of funds whose managers reside in the same neighborhood is considerably higher than that of funds whose managers live in the same city but in different neighborhoods. These effects are larger when managers share a similar ethnic background, and are not explained by preferences. Valuable information is transmitted through these peer networks: a long-short strategy composed of stocks purchased minus sold by neighboring managers delivers positive risk-adjusted returns. Unlike prior empirical work, our tests disentangle the effects of social interactions from community effects.

A unique data set from a large Ponzi scheme allows me to study word-of-mouth diffusion of investment information. Investors could join the scheme only by invitation from an existing member, which allows me to observe how the idea spreads from one person to the next based on inviter-invitee relationships. I find that the observed social network has a scale-free connectivity structure, which significantly facilitates the diffusion of the investment idea and contributes to the growth and survival of the socially spreading Ponzi scheme. I further find that investors invest more if their inviter has comparatively higher age, education, and income.

Power transforms consumer behavior. This research introduces a critical theoretical moderator of power's effects by promoting the idea that power is accompanied by both an experience (how it feels to have or lack power) and expectations (schemas and scripts as to how those with or without power behave). In some cases, the psychological experience of power predisposes people to behave one way, whereas attention to the expectations of power suggests behaving in another way. As a consequence, power's effects for consumer behavior can hinge on consumers' focus. Specifically, a focus on the experience or expectations of power critically moderates how power affects both information processing and status seeking. However, as the experience of power incites a desire to act, and the powerful are expected to act, power produces more action regardless of focus. These findings provide a new lens on power and have important implications for consumer behavior.

Facebook is a ubiquitous platform for self-disclosure; however, norms associated with online and offline disclosure appear to differ. The present study investigated whether people's disposition to disclose and comfort with others' disclosures of negatively-valenced content differs online and offline. Additionally, psychological predictors of offline and online disclosure were explored. Results revealed that offline disclosure of negatively-valenced personal information is preferred to online disclosure and that comfort with others' disclosure of such information is greater offline than online. As information becomes more sensitive, the likelihood of sharing this information online decreases; similarly, the degree of comfort with others' online disclosure of such information decreases. Agreeableness was positively correlated with reactions to others' online posts. Agreeableness, openness, self-esteem and emotional stability were positively correlated with comfort with others' offline disclosures. Tendency to disclose online was higher for those with low emotional stability and low openness (but only for some scenarios). Age effects were most prominent with respect to the information shared and comfort with others' disclosures, but across age groups there was a preference for offline, rather than online, sharing. Collectively, the results reveal that individual differences are weaker predictors of online disclosure than the nature of information disclosed.

This paper introduces a utility function that nests three classes of utility functions: 1) time-separable utility functions; 2) "catching up with the Joneses" utility functions that depend on the consumer's level of consumption relative to the lagged cross-sectional average level of consumption; and 3) utility functions that display habit formation. Incorporating this utility function into a Lucas (1978) asset pricing model allows calculation of closed-form solutions for the prices of stocks, bills and consols under the assumption that consumption growth is i.i.d. Then equilibrium asset prices are used to examine the equity premium puzzle.

Self-presentation is a fundamental aspect of social life, with myriad critical outcomes dependent on others' impressions. We identify and offer the first empirical investigation of a prevalent, yet understudied, self-presentation strategy: humblebragging. Across 9 studies, including a week-long diary study and a field experiment, we identify humblebragging-bragging masked by a complaint or humility-as a common, conceptually distinct, and ineffective form of self-presentation. We first document the ubiquity of humblebragging across several domains, from everyday life to social media. We then show that both forms of humblebragging-complaint-based or humility-based--are less effective than straightforward bragging, as they reduce liking, perceived competence, compliance with requests, and financial generosity. Despite being more common, complaint-based humblebrags are less effective than humility-based humblebrags, and are even less effective than simply complaining. We show that people choose to deploy humblebrags particularly when motivated to both elicit sympathy and impress others. Despite the belief that combining bragging with complaining or humility confers the benefits of each strategy, we find that humblebragging confers the benefits of neither, instead backfiring because it is seen as insincere.

Questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications. It was found that direct interpersonal communications are very important in investor decisions. Questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word-of-mouth communications or other salient stimuli. Randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically. Contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth. The survey evidence is interpreted as supporting such models.

I test whether social influence affects individual investors' trading and stock returns. In each of the 20 most active stocks in Finland over 9 years, the number of owners in a municipality multiplied by the number of investors who do not own a stock, a measure of the rate of transmission of diseases and rumors through social contact, predicts individual investor trading. I control for known determinants of trade, including daily news, and show that competing explanations for the relation are unlikely. Socially motivated trades predict stock returns, and the effects are not reversed, suggesting that individuals share useful information. Individuals' susceptibility to social influence has declined during the period, but the opportunities for social influence have increased.

Using the historical random assignment of MBA students to sections at Harvard Business School (HBS), I explore how executive peer networks can affect managerial decision making. Within an HBS class, firm outcomes are significantly more similar among graduates from the same section than among graduates from different sections, with the strongest effects in executive compensation and acquisitions strategy. I demonstrate the role of ongoing social interactions by showing that peer effects are more than twice as strong in the year following staggered alumni reunions. Supplementary tests suggest that peer influence can operate in ways that do not contribute to firm productivity.

Work in political communication has discussed the ongoing predominance of negative news, but has offered few convincing accounts for this focus. A growing body of literature shows that humans regularly pay more attention to negative information than to positive information, however. This article argues that we should view the nature of news content in part as a consequence of this asymmetry bias observed in human behavior. A psychophysiological experiment capturing viewers' reactions to actual news content shows that negative news elicits stronger and more sustained reactions than does positive news. Results are discussed as they pertain to political behavior and communication, and to politics and political institutions more generally.

Can the positivity bias, observed across various Social Network Sites (SNSs), predict the use of prosocial lies in a SNS such as Facebook? The positivity bias may be a product of politeness norms (i.e., positive face concern) that have influenced communication phenomena before these sites existed. In addition, positive face concern may also be affected by unconscious cues or primes that promote prosocial behavior on Facebook. We conducted an online experiment using current Facebook users to examine how positive face concern and surveillance primes affect prosocial lying in public and private Facebook contexts. Although positive face concern and publicness predicted the use of prosocial lying, positive face concern was not affected by the publicness and surveillance primes did not affect positive face concern or the use of prosocial lies in our study. This hints towards the nuance of positive face concern and the potential limitations of surveillance primes on prosocial lying behavior.