Decoding peer effects: The role of information in Chinese household financial investments

This paper investigates peer effects in investment behaviors of Chinese households with respect to wealth management products. We find that peer effects among neighbors exist at both extensive and intensive margins, even in situations where households cannot observe their peers' behaviors due to incomplete information. Heterogeneity analyses suggest that the mechanism driving these effects may be the spread of financial information and knowledge via social interactions. This peer-driven information dissemination has the potential to reduce inequality by enhancing household financial participation. Policymakers can leverage these insights to encourage broader financial engagement and mitigate wealth disparities.