The Influence of Upward Social Comparison on Retail Trading Behavior

Abstract

The environment in which people make investments is changing substantially. Digitization made financial investing easily accessible to anyone with internet access and some disposable capital. Online investing is often facilitated by social media, where the information of peer top performers is often widely accessible and distributed. We investigate the impact of upward social comparison on risk taking, on trading activity and on investor satisfaction using a tailored experiment with 807 experienced retail investors. We find that investors presented with an upward social comparison take more risk and trade more actively, and they report significantly lower satisfaction with their own performance. These effects are triggered by a cognitive response to social influence, moderated by affect. Our findings demonstrate the pitfalls of modern and growing digital investment platforms with peer information and social trading. The widespread implications of this study also provide guidelines for improving retail investor satisfaction and protection.

The Influence of Social Comparison Orientation on Attitudinal Loyalty, Brand Happiness, and Willingness to Purchase a Masstige Brand

“…Individuals tend to compare themselves with other individuals. Social comparison orientation is defined as a social influence that can change behavior and assessments and attitudes as a result of observing the behavior of others (Andraszewicz et al, 2022). Thus, it becomes interesting to investigate when someone can do social comparison and to assess the consequences that follow (Gerber, 2020).…”