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Peer attention and the disposition effect

Author

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  • Minh-Lý Liêu

    (University of Paderborn)

Abstract

Social trading platforms allow investors to interact with each other. This paper studies the impact of peer attention on social trading platforms on investors' disposition effect. Using a difference-in-differences approach, I find a significant increase in the disposition effect when investors receive attention from their peers. This disposition effect increases as the number of other investors distributing likes to one another's trading decisions increases. This effect is driven both by holding on to losing positions longer and by closing winning positions faster. This finding may be explained by social facilitation theory. In the presence of others, investors want to achieve superior outcomes and limit their losses.

Suggested Citation

  • Minh-Lý Liêu, 2021. "Peer attention and the disposition effect," Working Papers Dissertations 81, Paderborn University, Faculty of Business Administration and Economics.
    • Handle: RePEc:pdn:dispap:81
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    File URL: http://groups.uni-paderborn.de/wp-wiwi/RePEc/pdf/dispap/DP81.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Social trading; transparency; disposition effect; online trading platforms.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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