Apesteguia, Jose ; Oechssler, Jörg ; Weidenholzer, Simon
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Abstract
Copy trading allows traders in social networks to receive information on the success of other agents in financial markets and to directly copy their trades. Internet platforms like eToro, ZuluTrade, and Tradeo have attracted millions of users in recent years. The present paper studies the implications of copy trading for the risk taking of investors. Implementing an experimental financial asset market, we show that providing information on the success of others leads to a significant increase in risk taking of subjects. This increase in risk taking is even larger when subjects are provided with the option to directly copy others. We conclude that copy trading reduces ex-ante welfare, and leads to excessive risk taking.
| Document type: | Working paper |
|---|---|
| Series Name: | Discussion Paper Series |
| Volume: | 0649 |
| Place of Publication: | Heidelberg |
| Date Deposited: | 29 Jun 2018 09:26 |
| Date: | 27 June 2018 |
| Faculties / Institutes: | The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics |
| DDC-classification: | 330 Economics |
| Controlled Keywords: | Copy trading, Financial markets, Social networks, Imitation, Experiment |
| Schriftenreihe ID: | Discussion Paper Series / University of Heidelberg, Department of Economics |
