Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/31283 
Year of Publication: 
2008
Series/Report no.: 
Working Paper No. 2007-01
Publisher: 
Rutgers University, Department of Economics, New Brunswick, NJ
Abstract: 
We consider a model of an internet chat room with free entry but secure identity. Traders exchange messages in real time of both a fundamental and non-fundamental nature. We explore conditions under which traders post truthful information and make trading decisions. We also a describe an equilibrium in which momentum traders profit from their exposure to informed traders in the chat room. The model generates a number of empirical predictions: (1) unskillful traders post more often than skillful traders; (2) skillful traders will not follow unskillful traders in stock picking; (3) The optimal strategy for unskillful traders is to follow skillful traders in stock picking. We test and affirm all three predictions using a unique data set of chat room logs from the Activetrader Financial Chat Room.
Subjects: 
Chat room
strategic information
JEL: 
G14
Document Type: 
Working Paper

Files in This Item:
File
Size
408.54 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.