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Dorfleitner, Gregor ; Scheckenbach, Isabel

Trading activity on social trading platforms – a behavioral approach

Article

Dorfleitner, Gregor and Scheckenbach, Isabel (2022) Trading activity on social trading platforms – a behavioral approach. Journal of Risk Finance 23 (1), pp. 32-54.

DOI to cite this document: 10.5283/epub.47919


Abstract

Social trading platforms are considered to be amongst the major innovations in online trading. The purpose of this article is to analyze the trading activity of traders on social trading networks by taking a behavioral approach. We investigate the factors that influence the irrational part of trading activity derived from the key characteristics of these platforms, i.e. those dealing with social ...

Social trading platforms are considered to be amongst the major innovations in online trading. The purpose of this article is to analyze the trading activity of traders on social trading networks by taking a behavioral approach. We investigate the factors that influence the irrational part of trading activity derived from the key characteristics of these platforms, i.e. those dealing with social interaction. Our investigation utilizes an extensive set of trading data from two major platforms in Germany to study the trading behavior. We apply a fixed effects two-stage least squares approach to quantify the relationship between trading ctivity and performance and define overconfidence as the part of trading activity that is irrationally motivated and results in negative returns. Our results provide evidence for the negative relationship between overconfidence and return on social trading platforms. The article finds that the number of followers and some platform-specific features significantly affect the trading behavior of the traders. We contribute to literature by exploring how the novel social interaction characteristics of online trading impact trading activity by giving rise to a new dimension of overconfidence. In addition, we evidence that the different frameworks of the platforms motivate heterogenous behavioral responses by the signalers. Finally, we refine existing studies by applying a distinct methodology for modeling overconfidence.


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Details

Item typeArticle
Journal or Publication TitleJournal of Risk Finance
PublisherEmerald
Volume23
Number of Issue or Book Chapter1
Page Rangepp. 32-54
DateSeptember 2022
Date of publication01 Sep 2021 09:17
InstitutionsBusiness, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzierung (Prof. Dr. Gregor Dorfleitner)
Classification
NotationType
G14 -G20 - G41Journal of Economics Literature Classification
KeywordsSocial trading platforms, overconfidence, social interaction, individual trading behavior, behavioral finance
Dewey Decimal Classification300 Social sciences > 330 Economics
StatusPublished
RefereedYes, this version has been refereed
Created at the University of RegensburgYes
URN of the UB Regensburgurn:nbn:de:bvb:355-epub-479198
Item ID47919

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