Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/207625
Authors: 
Apesteguia, Jose
Oechssler, Jörg
Weidenholzer, Simon
Year of Publication: 
2018
Series/Report no.: 
Discussion Paper Series No. 649
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
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.
Subjects: 
Copy trading
Financial markets
Social networks
Imitation
Experiment
JEL: 
C91
D81
G12
G20
G41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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