Jose Apesteguia, Joerg Oechssler, Simon Weidenholzer, 29 September 2018

Copy trading platforms, which allow traders on social networks to receive information on the success of other agents in financial markets and to directly copy their trades, have attracted millions of users in recent years. This column examines the implications of copy trading for investors’ risk taking. An experiment reveals that providing information on the success of others significantly increases risk taking, and that this increase is even greater when the option to directly copy others is present. The findings suggest that copy trading platforms may lead to excessive risk taking and reduce ex ante welfare.

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