Does a scopic regime erode the disposition effect? Evidence from a social trading platform

A scopic regime constitutes a state of permanent reciprocal observation and scrutiny among participants. We investigate whether this environment reduces the disposition effect among retail traders as they are constantly scrutinized by others, thus driving them to realize and limit their losses. We u...

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Bibliographic Details
Main Authors: Gemayel, R. (Author), Preda, A. (Author)
Format: Article
Language:English
Published: Elsevier B.V. 2018
Subjects:
Online Access:View Fulltext in Publisher
LEADER 01850nam a2200217Ia 4500
001 10.1016-j.jebo.2018.08.014
008 220706s2018 CNT 000 0 und d
020 |a 01672681 (ISSN) 
245 1 0 |a Does a scopic regime erode the disposition effect? Evidence from a social trading platform 
260 0 |b Elsevier B.V.  |c 2018 
856 |z View Fulltext in Publisher  |u https://doi.org/10.1016/j.jebo.2018.08.014 
520 3 |a A scopic regime constitutes a state of permanent reciprocal observation and scrutiny among participants. We investigate whether this environment reduces the disposition effect among retail traders as they are constantly scrutinized by others, thus driving them to realize and limit their losses. We use two anonymous data sets, the first from a popular social trading platform (STP) governed by a scopic regime, and the second from a traditional foreign exchange broker. STPs allow participants to interact and copy each other's trades using mirror trading, thus implicitly creating two groups; trade leaders who execute unique trades to build their performance record, and copiers who allocate funds to be managed by the former. We find ample evidence of a weaker disposition effect among trade leaders in the scopic environment compared to traders in a traditional setting. Our findings suggest that a state of constant observation and scrutiny erodes the disposition effect as individuals become more self-conscious of their actions and limit their losses to avoid tarnishing their public trading record. © 2018 Elsevier B.V. 
650 0 4 |a Behavioral bias 
650 0 4 |a Disposition effect 
650 0 4 |a Foreign exchange 
650 0 4 |a Retail trading 
650 0 4 |a Scopic regime 
650 0 4 |a Social trading 
700 1 |a Gemayel, R.  |e author 
700 1 |a Preda, A.  |e author 
773 |t Journal of Economic Behavior and Organization