Risk sharing, siblings, and household equity investment: evidence from urban China

In a society where financial market and insurance market are under-developed, social networks play an important role in risk sharing. Using data from the 2011 China Household Finance Survey, this paper examines the effect of siblings, which form strong ties in a social network, on household equity investment. We find that having one more sibling increases the probability of participation in stock market by 15-17% points and increases the fraction of total assets in stock investment by 2-3% points. We also find that sisters have a larger effect on equity investment than brothers. With the examination of the effects of siblings on social interaction, risk tolerance, saving, and borrowing behaviors, we argue that the main channel through which siblings affect household investment is risk sharing.