Going Mobile, Investor Behavior, and Financial Fragility

56 Pages Posted: 24 Jul 2019

See all articles by Xiao Cen

Xiao Cen

Columbia University - Columbia Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 2018

Abstract

This study investigates how mobile trading technology affects retail investor behavior and mutual fund fragility using proprietary individual-level fund trading data. I exploit a natural experiment, the release of a popular mobile trading application by a leading investment adviser in China. My difference-in-difference analysis shows "going mobile" raises investor attention and trading volume through aggravating investors' over-confidence and self-control problem. The mobile app significantly boosts flow volatility, and makes investor flow more sensitive to short-term fund return and market sentiment. As a result, "going mobile" depresses fund performance by heightening indirect liquidity costs. The funds more exposed to the shock see a greater decline in abnormal return, explained by large fund flows through the trading app.

Lastly, I combine Instrumental Variable method and a spatial discontinuity setting to strengthen causal inference. Overall, the paper shows "going mobile" intensifies financial fragility and dampens mutual fund performance by amplifying investors' cognitive biases.

Keywords: Financial fragility,mobile technology, trading, volatility, fund flows

JEL Classification: G02, G14

Suggested Citation

Cen, Xiao, Going Mobile, Investor Behavior, and Financial Fragility (April 2018). 3rd Chapman Conference on Money and Finance - Financial Market Development in Emerging Asia: Impact on Corporate Performance, Capital Flows and Politics | May 4, 2018, Available at SSRN: https://ssrn.com/abstract=3424405 or http://dx.doi.org/10.2139/ssrn.3424405

Xiao Cen (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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