Peer Pressure: Social Interaction and the Disposition Effect

Heimer, Rawley Z.

doi:10.26509/frb-wp-201618

Cited by 27 publications

(38 citation statements)

References 13 publications

(13 reference statements)

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“…Both markets are primarily served by online brokerages, and are increasingly accessible to clients that do not have much initial capital and are seeking low, or even zero-commissions (e.g., Robinhood Markets, Inc.). More concretely, Heimer (2016) provides evidence that the behaviors of myForexBook traders are similar to the behaviors of retail stock traders on a large discount brokerage that has been extensively studied by the finance literature (Barber and Odean, 2000).…”

Section: Representativeness Of the Transaction-level Datamentioning

confidence: 83%

Should retail investors’ leverage be limited?

Heimer

Simsek

2019

Journal of Financial Economics

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We thank the operators of the social network for providing us the data, Alex Dusenbery for helping with the database, Jonathon Hazell for providing outstanding research assistance, and Adrien Verdelhan for giving us data from Brusa et al., 2014. We acknowledge the financial support of NSF Early Career Grant under Grant Number SES-1455319. Any remaining errors or omissions are the authors' responsibility. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Representativeness Of the Transaction-level Datamentioning

confidence: 83%

Should retail investors’ leverage be limited?

Heimer

Simsek

2019

Journal of Financial Economics

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“…The contrasts between large sellers and small sellers are more apparent when we use the IV regression instead of the fixed‐effects model. Following previous literature (Balli & Sørensen, 2013; Heimer, 2016; Popova, 2014), we instrumented the interaction term between WOMLogistics and LargeSeller with two new IVs: the interaction term between AvgBuyerCredit and LargeSeller and the interaction term between LogisticsFirmChoice and LargeSeller . As shown in Table 3, WOM about logistics has virtually no impacts on sales for small sellers.…”

Section: Resultsmentioning

confidence: 99%

Impacts of logistics information on sales: Evidence from Alibaba

Luo

Rong

Zheng

2020

Naval Research Logistics

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Facing fierce competition from rivals, sellers in online marketplaces are eager to improve their sales by delivering items faster and more reliably. Because logistics quality can be known only after a transaction, sellers must identify effective ways to communicate logistics information to consumers. Drawing on the accessibility‐diagnosticity framework, we theorize that the sales impacts of logistics information depend on its relative diagnostic value. Using data on 1493 items with 505,785 consumer reviews from an online marketplace, we examine how sales are affected by three information sources for logistics services: online word of mouth (WOM) about logistics, self‐reported logistics services, and expected delivery time. We use an instrumental variable method to address the endogeneity issue between sales and WOM. We find that, ceteris paribus, consumers give more weight to WOM about logistics and delivery time when they make purchase decisions but less weight to self‐reported logistics service. The effects of logistics information on sales are asymmetric for large and small sellers.

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“…Liu et al () examine prospect theory among social trading investors and find support for the reflection effect and loss aversion. Heimer () uses data from a social trading network, which cooperates with several online brokers, and concludes that social traders are more prone to the disposition effect than traders not connected to the network. Pelster and Hofmann () additionally show that traders are more prone to the disposition effect when other traders follow their strategies.…”

Section: Institutional Framework and Related Literaturementioning

confidence: 99%

What Drives Investment Flows Into Social Trading Portfolios?

Röder

2019

J of Financial Research

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We investigate investment flows into more than 5,300 social trading portfolios that are issued as structured products and are tradable at a regular exchange. We find that investment flows chase past performance. However, in contrast to mutual fund flows, the flow-performance relation exists nearly exclusively for the best performing social trading portfolios. Flows follow raw returns rather than factor model alphas. Additionally, flows are highly persistent. Finally, social trading portfolios with higher visibility on the web page of the social trading platform as well as traders communicating actively to investors via public comments attract higher inflows.

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Peer Pressure: Social Interaction and the Disposition Effect

Cited by 27 publications

References 13 publications

Should retail investors’ leverage be limited?

Should retail investors’ leverage be limited?

Impacts of logistics information on sales: Evidence from Alibaba

What Drives Investment Flows Into Social Trading Portfolios?

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