In this project, I investigate several aspects of retail investors’ trading behavior. In particular, the project studies the impact of several innovative brokerage services on investors’ trading activities.

In a first paper (Pelster and Hofmann, 2018), I study the trading activities of retail investors that trade on a social trading platform. A social trading platform combines features of online brokerage with features of social media. These platforms allow investors to interact with each other, observe the trading activities of other investors, and—manually or automatically—copy the investment strategies of their peers. In our paper, we study the impact of becoming a peer advisor in the context of social trading. Our results indicate that these investors, i.e. the investors who become leaders, are especially concerned with their social image and are more susceptible to the disposition effect.

In work in progress, I study the impact of framing of online trading accounts on the disposition effect and investors’ risk preferences with respect to peers’ profits.

In additional work in progress (Arnold, Pelster and Subrahmanyam, 2018), I study the impact of push messages sent by a brokerage service to their client investors on clients’ trading activity.

 

Funding:

  • Parts of the research project (“Framing and the Disposition Effect“) are supported by the Gesellschaft für experimentelle Wirtschaftsforschungs e.V. (Heinz Sauermann-Förderpreis zur experimentellen Wirtschaftsforschung).

 

Publications:

  • Pelster, M.; Hofmann, A. (2018): “About the fear of reputational loss: Social trading and the disposition effect”, Journal of Banking and Finance 94, 75-88.

 

Work in progess:

  • Arnold, M.; Pelster, M.; Subrahmanyam, M.G. (2018): “How Does Investor Attention Affect Trading Behavior?”
  • Pelster, M. (2018): “Framing and the Disposition Effect”.

 

Related projects:

  • Social Trading and the Wisdom of Crowds.