The Disposition Effect in Social Trading: Influence of Transparency on Investment Decisions

Determinants of leadership in online social trading: A signaling theory perspective

“…This study expands the ideas of signaling theory in network leadership by evidencing its relationship to the herd behavior (Banerjee, 1992) and the disposition effect (Glaser & Risius, 2016;Heimer, 2016;Lukas et al, 2017). Our results suggest that for followers, placing trust in someone with a strong career and professional background in investment trading is the most pertinent factor.…”

“…Online social trading networks and platforms can help individuals that manage their money online make better financial decisions by providing more peer or aggregated crowd information for better risk management (Zhao et al, 2015). The disposition effect, i.e., the tendency of traders to forgo loss realization in favor of gain realization, seems to be lower in an online social trading environment due to higher transparency and the sense of being observed (Lukas, Eshraghi, & Danbolt, 2017). Traders' disposition effect seems to be affected by the attention they receive from their followers who believe in the traders' strategy (Glaser & Risius, 2016).…”

What Drives Investment Flows Into Social Trading Portfolios?

“…Pelster and Hofmann () additionally show that traders are more prone to the disposition effect when other traders follow their strategies. However, empirical evidence also suggests that traders are less prone to the disposition effect when their trades and holdings are visible for others (Lukas, Eshraghi, and Danbolt ).…”