A Boon or a Bane? An Examination of Social Communication in Social Trading

35 Pages Posted: 1 Apr 2021

See all articles by Jiaying Deng

Jiaying Deng

University of Washington - Michael G. Foster School of Business

Mingwen Yang

University of Washington

Matthias Pelster

Paderborn University

Yong Tan

University of Washington - Michael G. Foster School of Business

Date Written: March 10, 2021

Abstract

Social trading is an emerging market in the sharing economy, allowing inexperienced investors (copiers) to automatically follow the trades of experts (leaders) in real time. We use a separable temporal exponential random graph model (STERGM) to analyze the link formation and dissolution of a large social trading network. In contrast to traditional social networks, social trading networks are characterized by a rapid dissolution of links, thereby increasing the importance of studying network dissolution. We investigate how social communication, along with financial performance and demographics, affects dynamic network evolution and address the existing dependence among copier-leader links. Our results show that social communication, financial performance, and demographic factors are important determinants of link formation. However, once a link is formed, copiers mainly focus on financial performance and communication but not on demographic factors. Thus, the determinants of link formation and dissolution are asymmetric. Different types of social communication, such as posts and comments, have different implications for link formation and dissolution. Our findings provide important implications for both investors and social trading platforms.

Keywords: Social Trading, Copy Trading, Social Communication, STERGM

Suggested Citation

Deng, Jiaying and Yang, Mingwen and Pelster, Matthias and Tan, Yong, A Boon or a Bane? An Examination of Social Communication in Social Trading (March 10, 2021). Available at SSRN: https://ssrn.com/abstract=3802038 or http://dx.doi.org/10.2139/ssrn.3802038

Jiaying Deng (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Mingwen Yang

University of Washington ( email )

UW Foster School of Business ISOM Department
Box 353226
Seattle, WA 98195
United States

Matthias Pelster

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Yong Tan

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3226
United States

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