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The effects of community-based signals on investment decisions in copy trading

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  • Erdős, Sándor
  • Papp, Tamás
  • Vörös, Zsófia

Abstract

This study examines the importance and effects of community-based signals when choosing a trader to copy in a mock-up social trading platform. Although the studies examining the effects of social influence in choosing a trader to copy and herding point toward the importance of social influence, these works do not evaluate how related signals in different constellations with other signals affect the copying behavior. The results of a two-alternative forced-choice experiment in which subjects made 18 investment decisions systematically show the importance of community-based signals in the selection of traders judged worth copying, i.e., their potential to influence investment decisions and the general preference toward positive social profiles.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:soceco:v:97:y:2022:i:c:s2214804322000234
    DOI: 10.1016/j.socec.2022.101847
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    References listed on IDEAS

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    More about this item

    Keywords

    Social trading; Copy trading; Community-based signals; Investing; Forced-choice experiment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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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