Trading activity on social trading platforms – a behavioral approach*

PurposeSocial trading platforms are considered to be amongst the major innovations in online trading. The purpose of this article is to analyze the trading activity of traders on social trading networks by taking a behavioral approach. Additionally, the authors investigate the factors that influence the irrational part of trading activity derived from the key characteristics of these platforms, i.e. those dealing with social interaction.Design/methodology/approachThe investigation utilizes an extensive set of trading data from two major platforms in Germany to study the trading behavior. The authors apply a fixed effects two-stage least squares (2SLS) approach to quantify the relationship between trading activity and performance and define overconfidence as the part of trading activity that is irrationally motivated and results in negative returns.FindingsThe results provide evidence for the negative relationship between overconfidence and return on social trading platforms. The authors find that the number of followers and some platform-specific features significantly affect the trading behavior of the traders.Originality/valueThe authors contribute to the existing literature by exploring how the novel social interaction characteristics of online trading impact trading activity by giving rise to a new dimension of overconfidence. In addition, the authors evidence that the different frameworks of the platforms motivate heterogenous behavioral responses by the signalers. Finally, the authors refine existing studies by applying a distinct methodology for modeling overconfidence.

Firm, institutional and short sellers’ trading behavior around share repurchases

PurposeThis study investigates the valuation motive for increasing share repurchases: the authors analyze the trading dynamics between short sellers, institutional investors and the firm itself around share repurchases.Design/methodology/approachThe authors examine the valuation motive for share repurchases through an analysis of firm, institutional and short sellers’ trading behavior. The firm-level panel regression models using firm-quarter observations in the sample period are estimated.FindingsThe authors find that firms repurchase more intensely against increased short selling and that institutional investors trade in parallel with the repurchasing firm.Originality/valueResults suggest that firms disagree with short sellers’ intrinsic valuation of the firm, which is consistent with findings of recent studies such as Muzere (2019) and Bargeron and Bonaimé (2020).

THE INFLUENCE OF INFORMATION ON TRADING BEHAVIOR WITH PERSONALITY TRAITS AS MODERATION VARIABLE FOR STOCK TRADERS

The development of investment in Indonesia has increased rapidly over the past few years. One of the key factors affecting stock traders' trading behavior is information. Information that was previously difficult to obtain by investors became easily obtained due to technological developments. In addition to information, the characteristics of traders also influence their trading behavior. The population used in this study is the entire citizen of Surabaya, and the sample of this study is stock traders who have a minimum of 1-year trading experience. Data analysis is done by using Partial Least Square with Smart PLS 3.0. The result of this study is that information has a significant effect on trading behavior, while neuroticism, extraversion, openness, agreeableness, and conscientiousness do not moderate the effect of information on trading behavior significantly.

Household Finance

Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the life cycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision-making, financial literacy, cognition, and educational interventions. We also discuss literature on the provision and consumption of financial advice. (JEL D15, G41, G50, J26, Z13)