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The impact of peer returns in social trading

Author

Listed:
  • Klocke, Nina
  • Müller-Okesson, Daniel
  • Hasso, Tim
  • Pelster, Matthias

Abstract

This paper studies the impact of peers’ performance on social traders’ trading behavior. We analyze a large sample of trading records from a social trading brokerage service that allows its investors to interact with their peers in a social-media-like setting. We investigate how individuals’ trading activities change with respect to the outcomes of their peers in the network. We show that investors’ trading activities increase in their peers’ trading performance. As a result, the trading performance decreases, and the volatility of returns increases. We exploit plausibly unexpected performance shocks to address the endogeneity concern inherent in the analysis of peer effects.

Suggested Citation

  • Klocke, Nina & Müller-Okesson, Daniel & Hasso, Tim & Pelster, Matthias, 2025. "The impact of peer returns in social trading," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000383
    DOI: 10.1016/j.jbef.2025.101057
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    More about this item

    Keywords

    Social trading; Social interactions; Social comparison; Trading behavior; Decision making;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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