Peer Effects in the Trading Decisions of Individual Investors


  • Lilian Ng,

    1. Lilian Ng is the Hans Storr Professor of Finance at the Sheldon Lubar School of Business, University of Wisconsin at Milwaukee, Milwaukee, Wisconsin, USA.
    Search for more papers by this author
  • Fei Wu

    1. Fei Wu is a Professor of Finance at CRACM, School of Finance and Statistics, Jiangxi University of Finance and Economics, Nanchang, China and Massey University, Palmerston North, New Zealand.
    Search for more papers by this author

  • The authors would like to thank Warren Bailey, Bruce Bender, Bill Christie (the editor), Lily Fang, Sanjoy Ghose, Meijun Qian, Scott Weisbenner, Ning Zhu, an anonymous referee, participants at the 2006 Western Finance Association Meetings in Keystone, Colorado, the CRSP Forum, the National University of Singapore, Nanyang Technological University, Singapore Management University, the University of Connecticut, and Xiamen University for their many helpful suggestions and comments.


This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word-of-mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city.