The effect on the behaviour of investors using a social trading platform, Shareville

University essay from

Abstract: When buying a stock, it is impossible to take hundreds or thousands of stocks into consideration. A way for investors to simplify the search problem is to make the choice from stocks that have caught their attention. Motivated by the theories of human cognitive boundaries affecting investor behaviour, this thesis investigates the impact of attention effects on the behaviour of investors using a social trading platform, Shareville. Using a novel dataset from Shareville, we test the causal relation between the order volume and different attention proxies; comments, comments on a Friday and comments’ effect on buy orders. In addition, a sub sample with only the thirty largest and the thirty smallest Swedish firms is used. Our results indicate that order volume can be predicted by the number of comments on an asset, but that volume also has a positive and significant effect on the number of comments. Second, there is no evidence for that investors are more likely to show attention driven trading behaviour on a Friday. Third, we find that comments increase buy order volume more, compared to sell order volume. Fourth, the regressions containing firm size and profitability do not show an effect on order volume. We conclude that while there is a significant effect of comments on order volume, it is likely that our equations suffer from endogeneity due to reversed causality.

  AT THIS PAGE YOU CAN DOWNLOAD THE WHOLE ESSAY. (follow the link to the next page)