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Social trading, correlated retail investing and non-fundamental speculation

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  • Russ, David

Abstract

This paper shows that, in a setup 'a la Kyle (1985), correlated retail trading opens up new profit opportunities for professional investors at the expense of retail investors. Additionally, it demonstrates that market quality can benefit through higher market liquidity and higher price efficiency. Our results lend support to concerns that social trading via Finfluencers and stock message boards harms rather than benefits retail investors.

Suggested Citation

  • Russ, David, 2025. "Social trading, correlated retail investing and non-fundamental speculation," Discussion Papers 29/2025, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:330308
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    References listed on IDEAS

    as
    1. Peress, Joel & Schmidt, Daniel, 2021. "Noise traders incarnate: Describing a realistic noise trading process," Journal of Financial Markets, Elsevier, vol. 54(C).
    2. Manzano, Carolina & Vives, Xavier, 2011. "Public and private learning from prices, strategic substitutability and complementarity, and equilibrium multiplicity," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 346-369.
    3. Edwige Cheynel & Carolyn B. Levine, 2012. "Analysts’ sale and distribution of non fundamental information," Review of Accounting Studies, Springer, vol. 17(2), pages 352-388, June.
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    More about this item

    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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