Social trading: do signal providers trigger gambling?
Andreas Oehler () and
Julian Schneider
Additional contact information
Andreas Oehler: Bamberg University
Julian Schneider: Bamberg University
Review of Managerial Science, 2023, vol. 17, issue 4, No 6, 1269-1331
Abstract:
Abstract Social trading—also referred to as copy trading—is an interactive platform-based innovation facilitating visibility and traceability of signal provider trading activities. Based on published portfolio transaction and return track records, platform users can copy one or several signal providers, i.e. delegate their investment decisions, and thereby become signal followers. Allowing signal providers to administer purely virtual portfolios, in combination with a remuneration scheme based on performance fees and high watermarks, creates convex or option-like incentives (Carpenter, J Finance 55:2311–2331, 2000; Doering and Jonen, SSRN J, 2018). We argue that the incentive structure imposed by social trading providers, including a very limited monetary downside risk for signal providers, may motivate traders to gamble. In this context, we assess the factors that have an impact on signal provider lottery-like stock transactions (Bali et al., J Financ Econ 99:427–446, 2011; Kumar, J Finance 64:1889–1933, 2009). We provide empirical evidence that signal providers tend to increase the traded relative share of lottery-like stocks when being located at an extreme end of the relative performance spectrum. Furthermore, we provide evidence that underperforming signal providers increase their net exposure towards lottery-like stocks, in turn exposing signal followers to a lottery-like return structure—triggering gambling.
Keywords: Lottery-like Stocks; Gambling; Social Trading (search for similar items in EconPapers)
JEL-codes: G11 G23 G40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://link.springer.com/10.1007/s11846-022-00560-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
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:spr:rvmgts:v:17:y:2023:i:4:d:10.1007_s11846-022-00560-6
Ordering information: This journal article can be ordered from
http://www.springer.com/business/journal/11846
DOI: 10.1007/s11846-022-00560-6
Access Statistics for this article
Review of Managerial Science is currently edited by R. Ewert and W. Kürsten
More articles in Review of Managerial Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().