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Peer Effects and Risk Sharing in Experimental Asset Markets

Author

Listed:
  • Paul Gortner

    (Bundesbank)

  • Joël van der Weele

    (University of Amsterdam)

Abstract
We investigate the effect of introducing information about peer portfolios in an experimental Arrow-Debreu economy. Confirming the prediction of a general equilibrium model with inequality averse preferences, we find that peer information leads to reduced variation in payoffs within peer groups. Information also improves risk sharing, as the data suggests that experiencing earnings deviations from peers induces a shift to more balanced portfolios. In a treatment where we highlight the highest earner, we observe a reduction in risk sharing, while highlighting the lowest earner has no effects compared to providing neutral information. Our results indicate that the presence of social information and its framing is an important determinant of equilibrium in financial markets.

Suggested Citation

  • Paul Gortner & Joël van der Weele, "undated". "Peer Effects and Risk Sharing in Experimental Asset Markets," Tinbergen Institute Discussion Papers 19-027/I, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20190027
    as

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    File URL: https://papers.tinbergen.nl/19027.pdf
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    More about this item

    Keywords

    peer effects; laboratory experiments; risk taking; asset markets;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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