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Benefits from social trading? Empirical evidence for certificates on wikifolios

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  • Oehler, Andreas
  • Horn, Matthias
  • Wendt, Stefan

Abstract

Social trading describes the idea that signal providers make their investment decisions available to other investors who follow them. The performance of social trading has hardly been in the focus of research so far. We analyze the performance of 1084 wikifolio certificates used in social trading and issued in 2012 and 2013. We apply factor models to analyze these certificates' returns and alphas relative to benchmark indexes. We find that, on average, wikifolios do not outperform the market. However, wikifolios with geographical focus provide better performance than those without. Furthermore, the best performing wikifolios earn significant short-term excess returns.

Suggested Citation

  • Oehler, Andreas & Horn, Matthias & Wendt, Stefan, 2016. "Benefits from social trading? Empirical evidence for certificates on wikifolios," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 202-210.
    • Handle: RePEc:eee:finana:v:46:y:2016:i:c:p:202-210
    DOI: 10.1016/j.irfa.2016.05.007
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    Cited by:

    1. Scheckenbach, Isabel & Wimmer, Maximilian & Dorfleitner, Gregor, 2021. "The higher you fly, the harder you try not to fall: An analysis of the risk taking behavior in social trading," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 239-259.
    2. Breitmayer, Bastian & Massari, Filippo & Pelster, Matthias, 2019. "Swarm intelligence? Stock opinions of the crowd and stock returns," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 443-464.
    3. Czaja, Daniel & Röder, Florian, 2020. "Self-attribution bias and overconfidence among nonprofessional traders," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 186-198.
    4. Jin, Xuejun & Zhu, Yu & Huang, Ying Sophie, 2019. "Losing by learning? A study of social trading platform," Finance Research Letters, Elsevier, vol. 28(C), pages 171-179.
    5. Andreas Oehler & Stefan Wendt, 2017. "Good Consumer Information: the Information Paradigm at its (Dead) End?," Journal of Consumer Policy, Springer, vol. 40(2), pages 179-191, June.
    6. Dorfleitner, Gregor & Fischer, Lukas & Lung, Carina & Willmertinger, Philipp & Stang, Nico & Dietrich, Natalie, 2018. "To follow or not to follow – An empirical analysis of the returns of actors on social trading platforms," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 160-171.
    7. Erdős, Sándor & Papp, Tamás & Vörös, Zsófia, 2022. "The effects of community-based signals on investment decisions in copy trading," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 97(C).
    8. Mingwen Yang & Zhiqiang (Eric) Zheng & Vijay Mookerjee, 2022. "How Much Is Financial Advice Worth? The Transparency-Revenue Tension in Social Trading," Management Science, INFORMS, vol. 68(7), pages 5252-5268, July.
    9. Berger, Elisabeth S.C. & Wenzel, Matthias & Wohlgemuth, Veit, 2018. "Imitation-related performance outcomes in social trading: A configurational approach," Journal of Business Research, Elsevier, vol. 89(C), pages 322-327.
    10. Schneider, Julian & Oehler, Andreas, 2021. "Competition for visibility: When do (FX) signal providers employ lotteries?," International Review of Financial Analysis, Elsevier, vol. 78(C).
    11. Andreas Oehler & Julian Schneider, 2022. "Gambling with lottery stocks?," Journal of Asset Management, Palgrave Macmillan, vol. 23(6), pages 477-503, October.
    12. Florian Röder & Andreas Walter, 2019. "What Drives Investment Flows Into Social Trading Portfolios?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 42(2), pages 383-411, July.
    13. Andreas Oehler & Julian Schneider, 2023. "Social trading: do signal providers trigger gambling?," Review of Managerial Science, Springer, vol. 17(4), pages 1269-1331, May.
    14. Kromidha, Endrit & Li, Matthew C., 2019. "Determinants of leadership in online social trading: A signaling theory perspective," Journal of Business Research, Elsevier, vol. 97(C), pages 184-197.
    15. Steiger, Sören & Pelster, Matthias, 2020. "Social interactions and asset pricing bubbles," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 503-522.
    16. Riccardo Reith & Maximilian Fischer & Bettina Lis, 2020. "Explaining the intention to use social trading platforms: an empirical investigation," Journal of Business Economics, Springer, vol. 90(3), pages 427-460, April.
    17. Minh-Lý Liêu, 2021. "Peer attention and the disposition effect," Working Papers Dissertations 81, Paderborn University, Faculty of Business Administration and Economics.

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    More about this item

    Keywords

    Social trading; Social investing; Retail investors; Wikifolios; Herd behavior;
    All these keywords.

    JEL classification:

    • 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
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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