Joshua Thornton

Media

Market Watch - "Want to build wealth? You’ll improve your chances by befriending a specific type of person, science says."

The Conversation - "Having the 'right' friends may hold the secret to building wealth."

Newswise - "Friends with Money Benefits."

Wallet Hub - "Best Debt Consolidation Loans"

Publications

Peer Effects in Financial Expectations, March 2026, Journal of Empirical Finance

I provide evidence of a causal relationship between neighborhood financial expectations and individual financial expectations. I instrument for neighborhood financial expectations with average financial expectations of neighbors’ nonlocal family members. Additionally, a reverse causality test indicates that peer effects are unlikely to be driven by homophily. Consistent with a social interaction mechanism, I show that social individuals display larger peer effects. Next, I find that individuals who expect their financial situation to improve are less likely to save. This suggests that individuals act in accordance with their expectations. Finally, I show that individuals who incorporate neighborhood expectations form more accurate expectations when conditions support informative peer transmission.

• Presented at Baylor University, University of Texas El Paso, AFA Student Poster Session (2022), SFA (2021)

Working Papers

Friends with Benefits: Social Capital and Household Financial Behavior, February 2026 (with Brad Cannon and David Hirshleifer)

Using friendship data from Facebook, we study the effects of three aspects of social capital on household financial behavior. We find that the most important measure of social capital in explaining stock market and saving participation is Economic Connectedness, defined as the fraction of one’s social network with high socioeconomic status. One standard-deviation greater Economic Connectedness is associated with 2.9\% greater stock market participation and 5.0\% greater saving participation. Compared to Cohesiveness or Civic Engagement, Economic Connectedness explains more than 6 times the variation in stock market participation and more than 4 times the variation in saving participation. Using data on nonlocal friendships, we provide evidence supporting a causal link between household financial behavior and the income of one's friends. Furthermore, we provide evidence that greater opportunities for social interaction with wealthy individuals is associated with increased stock market and saving participation.

• Presented at Network Science in Economics Conference (2025), Research in Behavioral Finance Conference (2024), NFA Annual Meeting (2024), Boulder Summer Conference on Consumer Financial Decision-Making Poster Session (2024), GT-FRBA Household Finance Conference (2024), MFA Annual Meeting (2024), New Zealand Finance Meeting (2023)

Do Lenders Learn from Peer Firm Valuations?, January 2026 (with Brad Cannon and John Lynch)

A firm’s investment responds to the stock valuations of peer firms. For neighboring peers, this relation is stronger among financially constrained firms, robust to controlling for regional investment, and is driven by a more speculative component of valuations – the same is not true for industry peers. These geographical findings are difficult to reconcile with existing theories that link firm valuations to managerial learning. Instead, our findings suggest that lenders learn from peer firm valuations and allocate more credit to regions with higher stock valuations. Consistent with this explanation, financially constrained firms issue more debt and receive lower loan spreads when neighboring peer firms have higher valuations.

• Presented at FMA Annual Meeting (2024), Yale Whitebox Advisors Graduate Student Conference, Brigham Young University, Ohio University, Ohio State University

Social Capital and Innovation, February 2026 (with Brad Cannon and David Hirshleifer)

Using friendship data from Facebook, we study how three aspects of social capital shape local innovation. We find that the most important aspect of social capital in explaining innovation is Economic Connectedness (EC) — the fraction of one’s social network with high income. One standard deviation greater EC is associated with 68% more patents and 37% more breakthrough patents per capita for ZIP Codes with patent activity. Our evidence is most consistent with a channel where high-income friends affect innovation through an interaction between knowledge and funding. Having innovative social connections generates innovation only when there are also enough high-income social connections. Through two quasi-experiments — inventor relocations and income changes to non-local friends — we provide evidence supporting a causal link between innovation and friends’ incomes.

• Presented at CICF (2026), Network Science in Economics Conference (2026), USC Social and Behavioral Finance Conference (2025)

Does Sunshine "Cloud" Investor Judgment?, December 2025

Evidence from psychology literature confirms the long-held intuition that mood affects judgment. Specifically, individuals who are in a negative mood are more likely to think critically and avoid heuristic processing. This paper uses two proxies for mood, weather and media pessimism, to show that investors make better selling decisions when they are feeling sad. A one-unit increase in cloudiness leads to 1.4% 3-factor alpha improvement at a 12-month horizon. The disposition effect, which decreases in magnitude when investors are in a negative mood, provides an explanation for these results.

• Presented at UT San Antonio (2023), SWFA Annual Meeting (2022), UC Irvine (2019)

Feeling Like a Loan? Mood and Credit Applications in Peer-to-Peer Lending, April 2024 (with Brian Wolfe)

Using peer-to-peer loan applications from Lending Club and local weather, we find that positive mood increases the likelihood of applying for a loan. We show that borrower optimism is likely suboptimal in the peer-to-peer market because sunshine causes a decrease in borrower credit score and a decrease in the likelihood of a loan getting funded. While positive mood increases the extensive margin of loan applications, it actually decreases the intensive margin, suggesting that optimistic borrowers limit the overall effect of weather-induced mood. Lastly, by leveraging the free text of loan applications, we validate local weather as a shock to borrower mood.

• Presented at UT San Antonio (2024)

Disposition Effect, Growth Versus Value, January 2021

This paper explores the relationship between growth stocks, defined as stocks with low book-to-market ratios, and the disposition effect. Using a Cox proportional hazard model, I find that the disposition effect is significantly larger for stocks with low book-to-market ratios than for stocks with high book-to-market ratios. This difference in magnitude is driven by stock-level, as opposed to investor-level, char- acteristics. Taken together, the evidence suggests that investors make more mistakes with growth stocks because they are more difficult to value.

• Presented at UC Irvine (2019)

Teaching Experience

Statement of Teaching Philosophy

Evidence of Teaching Quality

Teaching Assistant:

Introduction to Finance (Undergraduates), Hankamer School of Business

Investments (Undergraduates), Hankamer School of Business

Teaching Awards:

Outstanding Undergraduate Teaching Award (2019-2020), Paul Merage School of Business

Teaching Evaluations:

2020-2021

2019-2020

2018-2019

2017-2018