EconPapers    
Economics at your fingertips  
 

To follow or not to follow – An empirical analysis of the returns of actors on social trading platforms

Gregor Dorfleitner, Lukas Fischer, Carina Lung, Philipp Willmertinger, Nico Stang and Natalie Dietrich

The Quarterly Review of Economics and Finance, 2018, vol. 70, issue C, 160-171

Abstract: We analyze the returns of traders, i.e. signal providers, on social trading platforms and of investors following these traders by utilizing differently sophisticated investment strategies. It becomes evident that simply investing in those traders with the highest accumulated returns leads to high losses, while taking the Sharpe ratio into account improves the achieved returns. Positive returns, however, are only possible for sophisticated strategies that consider information on the risk of the signal providers’ portfolios. Moreover, no strategy reveals a positive abnormal return after transaction costs in the sense of a Carhart four-factor model. Further, we analyze predictors of the weekly returns of the signal providers in a panel set-up. We find that highly active trading behavior is negatively related with the returns, while there is no wisdom-of-the-crowd effect, in the sense of a positive relationship of the number of followers or invested capital with the returns.

Keywords: Social trading; Performance analysis; Panel regression; Signal providers; Mirror trading; Investment strategies (search for similar items in EconPapers)
JEL-codes: G20 G32 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S106297691730248X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:70:y:2018:i:c:p:160-171

DOI: 10.1016/j.qref.2018.04.009

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-12-28
Handle: RePEc:eee:quaeco:v:70:y:2018:i:c:p:160-171