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Birds of a feather indebted together: Peer-effects on mortgage decisions

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  • Àkos Aczél

    (Central Bank of Hungary)

  • Lajos Szabó

    (Central Bank of Hungary)

Abstract

We examine peer-effects in mortgage borrowing decisions. We find that having a financially literate colleague improves the borrowing decision of financially less literate co-workers. The interest rate of the mortgage loan of these co-workers is significantly lower than similar employees at other companies who do not have such a colleague. The magnitude of the effect is economically significant, roughly one-fourth of the standard deviation of mortgage loan interest rates. Placebo and robustness tests verify our results. Roughly one-third of the effect is due to which bank is chosen by the borrower. The results are heterogeneous in the strength of competition among banks. In those districts where the competition is lower, the peer effect is considerably higher.

Suggested Citation

  • Àkos Aczél & Lajos Szabó, 2023. "Birds of a feather indebted together: Peer-effects on mortgage decisions," French Stata Users' Group Meetings 2023 20, Stata Users Group.
    • Handle: RePEc:boc:fsug23:20
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    File URL: http://repec.org/frsug2023/France23_Szabo.pdf
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    References listed on IDEAS

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    6. Paige Ouimet & Geoffrey Tate, 2020. "Learning from Coworkers: Peer Effects on Individual Investment Decisions," Journal of Finance, American Finance Association, vol. 75(1), pages 133-172, February.
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