This paper studies the impact of social interactions on investors’ trading behaviour and risk-taking. We analyse a large sample of trading records from a social trading brokerage service that allows its investors to interact with their peers in a social media-like setting. These records present a unique opportunity to investigate how individuals’ trading activities and risk-taking change with respect to the outcomes of their peers. We show that investors’ risk-taking increases as a result of their peers’ trading performance. We exploit plausibly unexpected shocks to peers’ performance to address the endogeneity concern inherent in the analysis of peer effects.
Keywords social interactions; social comparison; trading behaviour; decision making;
