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WHAT DRIVES INVESTMENT FLOWS INTO SOCIAL TRADING PORTFOLIOS?
Author(s) -
Röder Florian,
Walter Andreas
Publication year - 2019
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12174
Subject(s) - visibility , investment (military) , trading strategy , algorithmic trading , relation (database) , contrast (vision) , business , investment strategy , alternative trading system , financial economics , economics , monetary economics , finance , market liquidity , computer science , database , physics , artificial intelligence , politics , political science , law , optics
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.