Social trading, communication, and networks

Information Systems Research, forthcoming. TAF Working Paper No. 74/July 2022

64 Pages Posted: 1 Apr 2021 Last revised: 14 Jun 2023

See all articles by Jiaying Deng

Jiaying Deng

University of Washington - Michael G. Foster School of Business

Mingwen Yang

University of Washington - Michael G. Foster School of Business

Matthias Pelster

University of Duisburg-Essen - Mercator School of Management; european center for financial services (ecfs)

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 (followers) to automatically follow the trades of experts (leaders) in real time. We use a separable temporal exponential random graph model (STERGM) to analyze the formation and dissolution of links in a large social trading network. In contrast to traditional social networks, social trading networks are characterized by the 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 in the leader-follower links. 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 results show that financial performance and demographic characteristics also become important determinants of link formation. However, once a link is formed, followers focus mainly on financial performance, in addition to social communication, and not on demographic characteristics. Thus, our findings have 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, Social trading, communication, and networks (March 10, 2021). Information Systems Research, forthcoming. TAF Working Paper No. 74/July 2022, 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 - Michael G. Foster School of Business ( email )

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

Matthias Pelster

University of Duisburg-Essen - Mercator School of Management ( email )

Lotharstraße 65
Duisburg, Nordrhein-Westfalen 47057
Germany

european center for financial services (ecfs) ( email )

Lotharstraße 65
Duisburg, 47057
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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