This paper empirically examines the inf luence of “community effects,” in the form of word-of-mouth communication, on the decision about whether to participate in the stock market. In addition to its importance at the individ- ual level, equity market participation is also important at the aggregate level because of its ability to inf luence the size of the equity premium (Mankiw and Zeldes (1991), Heaton and Lucas (2000), Brav, Constantinides, and Gezcy (2002)). It is also relevant for a variety of public policies, ranging from the inci- dence of dividend tax policy to whether investing Social Security surpluses in private investments can have real effects on the economy.
