  Despite the popularity of product recommendations on online investment
platforms, few studies have explored their impact on investor behaviors. Using
data from a global e-commerce platform, we apply regression discontinuity
design to causally examine the effects of product recommendations on online
investors' mutual fund investments. Our findings indicate that recommended
funds experience a significant rise in purchases, especially among low
socioeconomic status investors who are most influenced by these
recommendations. However, investors tend to suffer significantly worse
investment returns after purchasing recommended funds, and this negative impact
is also most significant for investors with low socioeconomic status. To
explain this disparity, we find investors tend to gather less information and
expend reduced effort in fund research when buying recommended funds.
Furthermore, investors' redemption timing of recommended funds is less optimal
than non-recommended funds. We also find that recommended funds experience a
larger return reversal than non-recommended funds. In conclusion, product
recommendations make investors behave more irrationally and these negative
consequences are most significant for investors with low socioeconomic status,
which can amplify wealth inequality among investors in financial markets.
