Journal of Behavioral and Experimental Economics 97 (2022) 101847

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Journal of Behavioral and Experimental Economics

journal homepage: www.elsevier.com/locate/jbee

The effects of community-based signals on investment decisions in

copy trading
Sándor Erdős *, Tamás Papp, Zsófia Vörös
University of Pecs Faculty of Business and Economics: Pecsi Tudomanyegyetem Kozgazdasagtudomanyi Kar, Hungary

A R T I C L E I N F O A B S T R A C T

JEL classification: This study examines the importance and effects of community-based signals when choosing a trader to copy in a
G11 mock-up social trading platform. Although the studies examining the effects of social influence in choosing a
G41 trader to copy and herding point toward the importance of social influence, these works do not evaluate how
Keywords: related signals in different constellations with other signals affect the copying behavior. The results of a two-
Social trading alternative forced-choice experiment in which subjects made 18 investment decisions systematically show the
Copy trading
importance of community-based signals in the selection of traders judged worth copying, i.e., their potential to
Community-based signals
Investing
influence investment decisions and the general preference toward positive social profiles.
Forced-choice experiment

1. Introduction cognition-based signals (Wohlgemuth et al., 2016) influence copy

So far, research has provided evidence on the importance of affect-
based and cognition-based signals in the copy trading decisions in so­
cial trading environments (e.g., Wohlgemuth, Berger & Wenzel, 2016).
Still, community-based signals have, i.e., signals generated by the
trading community, received relatively little attention. Although the
studies examining the effects of social influence in choosing a trader to
copy and herding point toward the importance of social influence (e.g.,
Kromidha & Li, 2019; Pan, Altshuler & Pentland, 2012), these works do
not evaluate how related signals in different constellations with other
signals affect the decision making of copying. The results of Kromidha
and Li (2019), for instance, indicate that social elements such as cre­
dentials and popularity are essential to establish a relationship, how­
ever, their approach could not reveal how the same decision-maker
responds to different configurations of various signals, and it is not fully
possible to separate the effects of community-based signals from the
effects of the other information signals. Moreover, even theoretical
models on copy trading neglect community-based signals (Wohlgemuth
et al., 2016). In this study, by conducting a two-alternative forced-choice
experiment and using an experimental design that allows the explicit
distinction of the different types of signals and the systematic exami­
nation of their effects, we investigate the copy trading decisions of
working adults in a mock-up social trading environment. We point out
that not only signals sent by the leader traders, such as affect-based and
trading decisions, but also the signals that other users deliver, i.e.,
community-based signals.
2. Literature review
Social trading platforms (STPs) allow users to follow, inter alia, the
strategies, decisions, past performance, and current portfolio of other
traders in real-time, interact with other investors within the network,
and customize their profile, similarly to social media platforms. A
unique feature of STPs is that they allow investors to copy the invest­
ment decisions of others automatically, i.e., imitate the buying and
selling decisions of the trader they copy. Consequently, instead of an
exhaustive information search and decision-making process, investors
can benefit from the knowledge of other traders with a single click (Jin,
Zhu & Huang, 2019).
In social trading networks, investors broadly can be divided into two
groups: those who make their investment decisions independently and
those who copy the decisions of others. In the literature, the former
group is called “leader traders” (Gemayel & Preda, 2018a; Pelster &
Hofmann, 2018), or “signal providers” (Dorfleitner et al., 2018; Jin
et al., 2019), whereas the latter is referred to as “copy traders”, “copiers”
(Pelster & Breitmayer, 2019; Pelster & Hofmann, 2018; Wohlgemuth
et al., 2016), or “followers” (Dorfleitner et al., 2018; Jin et al., 2019).
So far, research on social trading has focused on concerns such as the

* Corresponding author.
E-mail addresses: erdos.sandor@ktk.pte.hu (S. Erdős), papp.tamas@ktk.pte.hu (T. Papp), voros.zsofia@ktk.pte.hu (Z. Vörös).

https://doi.org/10.1016/j.socec.2022.101847
Received 20 December 2021; Received in revised form 9 February 2022; Accepted 15 February 2022
Available online 17 February 2022
2214-8043/© 2022 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
S. Erdős et al.
traders’ exposure to disposition effect (Dorfleitner et al., 2018; Gemayel
& Preda, 2018b; Glaser & Risius, 2018; Heimer, 2016; Lukas, Eshraghi &
Danbolt, 2017; Pelster & Hofmann, 2018), overconfidence (Czaja &
Röder, 2020; Dorfleitner & Scheckenbach, 2021), the signal providers’
propensity toward gambling (Schneider & Oehler, 2021), investors’
profit-generating abilities (Dorfleitner et al., 2018; Oehler, Horn &
Wendt, 2016; Pan et al., 2012), or the herd behavior of leader traders
(Gemayel & Preda, 2018a). An interesting strand of the literature ex­
amines the factors determining the number of copiers signal providers
have Pan et al. (2012). investigated the analyzed platform’s top 300
most followed leader traders. They found that the number of copiers
formed a distribution close to a power-law curve, implying that users are
heavily affected by the existing number of copiers when making copy
trading decisions Ammann and Schaub (2016). showed that superior
past performance induces increased, positive communication, which, in
turn, affect investment flows toward signal providers. Finally, Pelster
(2018) and Röder and Walter (2019) concluded that the likelihood of
copying a leader trader is mainly explained by past performance.
Some studies argue that copying emerges if the signals that leader
traders make public reflect trustworthiness Wohlgemuth et al. (2016).
indicated that both affect-based and cognition-based signals raise the
probability of followers copying leader traders’ portfolios. As they
pointed out, affect-based signals indicate whether the signal provider
shares similar values with the copy trader or pursues self-centered
reward-seeking behavior. In contrast, cognition-based signals indicate
if the signal provider is technically competent in domain-specific tasks.
In a social trading environment, affect-based signals may include the
disclosure of real names, real profile pictures, or the activity level of
traders. Cognition-based signals relate to traders’ competence to trade
successfully and may include such factors as the rate of return in a given
period, the proportion of profitable transactions, or the highest return
that an investor has ever achieved Kromidha and Li (2019). also built on
signaling theory and showed that trader credentials, such as career,
membership, experience, and popularity, are more important than
performance, volume, or risk signals in choosing a leader in online social
trading. Though their empirical work indicated that social elements such
as credentials and popularity are essential to establishing a relationship,
their methodology could not reveal how the same decision-maker reacts
to different constellations of these signals. Thus, based on the signaling
theory that assumes signals play a central role in the emergence of copy
trading, we examine the effects of signals sent by the community on the
investment decisions of copy traders, i.e., community-based signals.
Several studies suggest that in human reward systems, i.e., when
decision-makers reward other community members with their attention,
financial contribution, or rating, social influence significantly impacts
decision-making. Research shows that those individuals who have
already been rewarded more by the community than other members are
more likely to attract the attention of new decision-makers (Van De Rijt,
Kang, Restivo & Patil, 2014). Moreover, studies related to financial
decision-making suggest that investors, due to the uncertainty sur­
rounding the investment decisions, tend to follow the decisions of
others, i.e., investors invest when the knowledge that others are
investing changes their decision from not investing to making the in­
vestment (Banerjee, 1992; Bikhchandani & Sharma, 2000; Oehler &
Wendt, 2009; Scharfstein & Stein, 1990).
As social trading environments can be regarded as human reward
systems where copiers reward the leader traders with their attention,
trust, and financial contribution, in this study, we hypothesize that so­
cial influence plays a significant role in copy trading decisions. We argue
that even in the presence of affect-based and cognition-based signals, a
fully informed maximizing decision-making on future investments is not
feasible. Therefore, to decrease the uncertainty, copiers also consider the
signals that the members of the social trading network provide, i.e., the
community-based signals. Thus, this study expands the dual-partitioning
of signaling theory related to copy trading in a social trading environ­
ment with community-based signals. We argue that signals stemming
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Journal of Behavioral and Experimental Economics 97 (2022) 101847
from other copiers in the social trading network play a particular role in
copying decision making. Although the co-existence of all three sets of
signals is not necessary for establishing trust in leader traders, we hy­
pothesize that trust is the strongest, i.e., copy trading is most likely to
occur, when all three dimensions are present and positive (see Fig. 1).
In sum, the following hypotheses are proposed in this study:
H1. In those conditions where the leader traders’ affect-based and
cognition-based signals are identical, copy traders prefer leader traders
with positive community-based signals.
H2. Copy traders prefer options with positive community-based
signals over options with no community-based information.
H3. In the case of conflicting affect-based and cognition-based sig­
nals, additional community-based signals influence copy traders’ pref­
erences toward those signals.
The remainder of the paper is organized as follows. In Section 2, we
show the experimental design and the sample. In Section 3, we present
the empirical results and discuss them, and finally, Section 4 concludes.
3. Materials and methods
3.1. Experimental design and material
A two-alternative forced-choice experiment was conducted in which
subjects made 18 investment decisions in a mock-up social trading
platform. The experiment consisted of two parts. In part 1, participants
answered three basic demographic questions (age, sex, and school
attainment), and in a yes/no format, they declared whether they have
investments, know and use social trading platforms, as well as read a
short instruction (see Section Appendix A). In the instruction, they were
informed that during the experiment, they should make decisions about
which leader trader’s (LT) investment strategy to copy to maximize their
earnings in an online mock-up social trading environment. Participants
also read a short description of the types of information they would base
their decisions on (see Table 1).
In part 2, participants acted as members of a social trading com­
munity and decided on which LT’s investment strategy to copy when
investing their own money. LT A and LT B were characterized in each
condition by means of the nine information elements listed in Table 1.
These nine information elements can be grouped into three types of
informational signals: affect-based, cognition-based, and community-
based signals. The first three pieces of information belong to the cate­
gory of affect-based signals, while the next three information elements
form the category of cognition-based signals (cf Wohlgemuth et al.,
2016). The last three pieces of information define the community-based
Fig. 1. Signal groups that build trust (cf Wohlgemuth et al. (2016)).
S. Erdős et al. Journal of Behavioral and Experimental Economics 97 (2022) 101847

Table 1 Table 2
Short description of information participants base their decisions. Rules to create the negative and positive signals.
Signal group Information Description of the information Information Positive Negative

Affect-based Name Real full name or chosen nickname of the Name Full name of the leader trader Chosen nickname
leader investor Profile picture AI-generated profile picture: Missing profile picture
Affect-based Profile picture Photo of the leader trader that is not Caucasian, male adult, with
required to be shared in the network short brown hair, brown eyes,
Affect-based Activity level Number of login days in the last two years and face expressing joy, taken
Cognition- Success rate of The proportion of profitable transactions from www.generated.photos.
based transactions in total transactions com
Cognition- Return Return on the total amount invested Activity level The number of login days in The number of login days in
based the last two years is greater the last two years is less than
Cognition- Maximum profit The highest return that the investor has than 584 146
based achieved ever achieved on a transaction Success rate of The proportion of profitable The proportion of profitable
Community- Number of copiers The number of users currently copy the transactions transactions in total transactions in total
based leader trader’s portfolio transactions is greater than transactions is less than 20%
Community- Invested amount The amount by which the portfolio of the 80%
based leader trader is copied Return Return on the total amount Return on the total amount
Community- Number of Number of users following the activity of invested is greater than 40% invested is less than 10%
based followers leader trader, but not copying it Maximum The highest return that the The highest return that the
profit investor has ever achieved on a investor has ever achieved on a
achieved transaction is greater than transaction is less than 12%
signals. The layout of the information screens was the same in each 48%
Number of The number of users currently The number of users currently
condition (Fig. 2).
copiers copying the leader trader’s copying the leader trader’s
All elements of a specific type of information were either positive or portfolio is greater than 800 portfolio is less than 200
negative to define a positive or negative affect-based, cognition-based, Invested The amount by which the The amount by which the
and community-based LT profile. It is important to note that in the case amount portfolio of the leader trader is portfolio of the leader trader is
of signals, the label positive or negative do not reflect an absolute copied is greater than 8 000 copied is less than 2 000 000
000 HUF HUF
judgment but refer to how a signal compares to the other alternative of
Number of The number of users following The number of users following
the forced-choice decision. Community-based signals may also have followers the leader trader is greater the leader trader is less than
been missing, as in some cases, we investigated the effect of additional than 2400 600
community-based signals (see more details in the Data section) Table 2.
Notes: In our experimental design, the criteria for determining whether a piece
shows the rules along which negative and positive signals were of information was negative or positive were derived using data from eToro (a
determined. social trading platform that currently has the largest number of users), as well as
The variation of positive, negative, and missing information profiles previous related literature (Wohlgemuth et al., 2016). Although the aim of the
defined 18 different conditions in which respondents made investment experiment was not to completely replicate any existing platform, the data
decisions (see Table 3). The conditions were elaborated to facilitate provided by eToro proved itself to be valuable in determining valid thresholds.
several types of analyses. Condition 1 (C1) and C2 served as control In the experiment, we utilized positive returns since underperforming accounts
conditions. If respondents failed to choose the entirely positive LT pro­ are unlikely to gain or sustain copiers (Schneider & Oehler, 2021), while
file, they were excluded from the analyses. The preference toward op­ top-performing leader traders are frequently included in the top ranks on the
platforms’ web pages and thus receive more attention (Röder & Walter, 2019).
tion A or option B in single conditions and the difference between two
decisions in specific conditions were analyzed (see the Data section for
more details).

Fig. 2. The layout of the information screens and the order of information shown to each participant.

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S. Erdős et al. Journal of Behavioral and Experimental Economics 97 (2022) 101847

Table 3
The 18 different conditions in which respondents made investment decisions (P=positive, N=negative).
Option A Option B

Affect-based Cognition-based Community-based Affect-based Cognition-based Community-based

C1 P P N N
C2 N N N P P P
C3 P N P P N N
C4 N P P N P N
C5 N N P N N N
C6 P P P P P N
C7 P P P P P
C8 P P P P N
C9 N P N P P
C10 N P N P N
C11 P N P N P
C12 P N P N N
C13 N N N N P
C14 N N N N N
C15 N P P N
C16 N P P P N N
C17 N P N P N P
C18 P P N N N P

Since community-based signals were missing from option A or option community-based signals. By comparing the decisions in specific con­
B in some conditions, but in order to run meaningful analyses, re­ ditions, we either tested the influence of the addition of positive or
spondents had to know if the other LT’s community-based signals were negative community-based signals (e.g., comparing the decisions in C7
relatively good or weak, we decided not to rotate the conditions; i.e., all and C8) or the effect of adding negative community-based signals to one
respondents made decisions in the same order. Thus, after the first of the options and positive community-based signals to the other; i.e.,
control condition, all respondents have seen the same five conditions, trying to shift the decisions into a specific direction (e.g., comparing the
with one option defining positive and one option defining negative decisions in C15 and C16) Table 4. shows the percentage of subjects
community-based signals (see Table 3) to learn to evaluate single choosing options A and B in each condition.
community-based signals.
With each decision, participants invested the same amount of money. 4. Results and discussion
However, participation was not incentivized, and disposing of the
invested amount only served to eliminate any differences that the hy­ Exact one-sample binomial tests with exact Clopper-Pearson 95% CI
pothesized variations of the invested amount across the conditions may were run to test if the proportion of subjects choosing options A and B in
have caused. the case of conditions C3-C6 significantly differs from the hypothesized
value of 50%. Thus, we have tested if community-based signals add
3.2. Participants important information to complement the affect-based and cognition-
based signals, and subjects select the option with positive community-
Participants voluntarily filled out the online pre-test and participated
in the experiment in the framework of a larger national assessment on Table 4
financial behavior between March and May 2021. Respondents’ written Number and proportion of respondents choosing options A and B for the 18
consent was obtained, and no incentives were offered for participation. conditions.
The study used a randomly selected national sample of 117 working Conditions Frequency Percent
adults. 126 subjects participated in the experiment, but nine partici­ Option A Option B Option A Option B Option A Option B
pants’ results were not taken into account as they failed at the two
C1 PP NN 117 0 100% 0%
control conditions. The remaining 117 subjects answered both control
C2 NNN PPP 0 117 0% 100%
questions correctly. The sample recruitment was conducted by a na­ C3 PNP PNN 93 24 79.5% 20.5%
tional market research company. The sample was a convenience sample, C4 NPP NPN 98 19 83.8% 16.2%
thus, it is unrepresentative of the population in terms of sex (62.4% C5 NNP NNN 88 29 75.2% 24.8%
C6 PPP PPN 82 35 70.1% 29.9%
male, 37.6% female), age (M = 43.29; SD = 12.398), and educational
C7 PP PPP 12 105 10.3% 89.7%
attainment (73.5% with college education). C8 PP PPN 22 95 18.8% 81.2%
C9 NP NPP 29 88 24.8% 75.2%
C10 NP NPN 72 45 61.5% 38.5%
3.3. Data and analyses C11 PN PNP 19 98 16.2% 83.8%
C12 PN PNN 73 44 62.4% 37.6%
The decision in single conditions and the shift of decisions among C13 NN NNP 14 103 12.0% 88.0%
conditions were analyzed. Tasks C3-C6 were created to study decisions C14 NN NNN 46 71 39.3% 60.7%
C15 NP PN 107 10 91.5% 8.5%
in conditions where the two LT’s community-based signals are different
C16 NPP PNN 113 4 96.6% 3.4%
meanwhile the other signals are the same. For example, if in C3, par­ C17 NPN PNP 85 32 72.6% 27.4%
ticipants prefer PNP over PNN, it suggests that when the affect-based C18 PPN NNP 95 22 81.2% 18.8%
signals are positive, and the cognition-based signals are negative,
Notes: The signal groups are listed in the following order in each condition:
community-based signals furnish important information, and positive affect-based, cognition-based, and community-based signal. As an example, in
signals are preferred. If community-based signals did not convey C3, respondents encountered one positive affect-based signal, one negative
important information, about the same percentage of subjects would cognition-based signal, and one positive community-based signal for Option A
choose option A and option B. By analyzing the single decisions of C7- (PNP), while one positive affect-based signal, one negative cognition-based
C14 tasks, we tested the effect of additional positive or negative signal, and one negative community-based signal for Option B (PNN).

4
S. Erdős et al.
based signals with higher probability than the option with negative
community-based signals when the other two signals do not change. The
preference for the positive community-based signal option had a 95% CI
60.9%− 75.8% - 78.2%− 89.9% (p = .000) in the case of the four possible
constellations of affect-based and cognition-based signals (PN, NP, PP
and NN) (see Table 5).
The signal groups are listed in the following order in each condition:
affect-based, cognition-based, and community-based signal. As an
example, in C3, respondents encountered one positive affect-based
signal, one negative cognition-based signal, and one positive
community-based signal for Option A (PNP), while one positive affect-
based signal, one negative cognition-based signal, and one negative
community-based signal for Option B (PNN).
By running exact one-sample binomial tests with exact Clopper-
Pearson 95% CI on the results of conditions C7-C14, we have studied
whether complementing the affect-based and cognition-based signals
with positive or negative community-based signals affect the investment
decisions. In the case of all possible arrangements of affect-based and
cognition-based signals (PN, NP, PP, and NN), significantly more sub­
jects have chosen the option with additional positive community-based
signals than the option with missing community-based signals, i.e., the
information lean option (C7, C9, C11, and C13). The preference for the
positive community-based profile options as compared to the missing
social information options had a 95% CI 66.4–82.8% - 82.7–94.6% (p =
.000). When the additional community-based signals were negative and
the affect-based and cognition-based signals were contradictory (C10
and C12), less subjects have chosen the option with community-based
signals (C10: 95% CI 29.6%- 47.9%, p = .016; C12: 95% CI 28.8%-
47.0%, p = .01). However, if both the affect-based and cognition-based
signals were negative or positive (C8 and C14), even the negative
community-based signals increased the probability of choosing the
information-rich option as compared to the option with missing
community-based signals (C8: 95% CI 72.9%- 87.8%, p = .000; C14:
95% CI 51.2%- 69.6%, p = .027) (see Table 6).
The signal groups are listed in the following order in each condition:
affect-based, cognition-based, and community-based signal. As an
example, in C3, respondents encountered one positive affect-based
signal, one negative cognition-based signal, and one positive
community-based signal for Option A (PNP), while one positive affect-
based signal, one negative cognition-based signal, and one negative
community-based signal for Option B (PNN).
Finally, paired comparisons of the decisions in the last four condi­
tions, we examined whether adding positive community-based signals to
one option and negative community-based signals to the other option
influences the decisions. In line with Wohlgemuth et al. (2016), the
results of task C15 indicate that the cognition-based signals are more
important than the affect-based signals when deciding on which LT’s
investment strategy to follow (E = 91.5%, 95% CI 84.8%− 95.8%,
One-Sample Binomial Test statistic =107.00 (SE=5.408), p = .000). A
McNemar test showed that when positive community-based signals are
added to the NP option and negative community-based signals are added
to the PN option (C16), significantly more respondents choose the first
option than in condition C15 (p=.031). Instead, negative
Table 5
The results of exact one-sample binomial tests with exact Clopper-Pearson 95% CI on the proportion of subjects choosing options A and B in the case of conditions C3-
C6.
Conditions
Option A Option B Parameter
C3 PNP PNN Probability(selected=A)
C4 NPP NPN Probability(selected=A)
C5 NNP NNN Probability(selected=A)
C6 PPP PPB Probability(selected=A)
Note: The number of respondents = 117, standard errors in parentheses.
*p < .05, **p < .01, *** p < .001.
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Journal of Behavioral and Experimental Economics 97 (2022) 101847
community-based signals diminish the preference for cognition-based
signals over affect-based signals (McNemar test C15-C17 p=.000). As
in condition C1, all subjects chose option A, it is not possible to statis­
tically compare the decisions in conditions C1 and C18. However, it is
interesting to see that 18.8% of subjects chose the option with positive
community-based signals and negative affect-based and cognition-based
signals, while none of the subjects opted for the option with negative
affect-based and cognition-based signals and missing community-based
signals. Finally, we did not find any systematic influence of de­
mographics or the knowledge of social trading platforms.
In sum, we found that community-based signals, along with affect-
based and cognition-based signals, play an important role in copy
trading decisions. In conditions where affect-based and cognition-based
signals were identical (C3-C6), investors clearly preferred alternatives
with positive community-based signals. Thus, the responses to C3-C6
support H1. The decision-influencing role of community-based signals
is further supported by the fact that subjects clearly preferred alterna­
tives with positive community-based signals over alternatives with
identical affect-based and cognition-based signals but missing
community-based signals. Hence, H2 is approved. Finally, comparing
the answers of C16–17 with C15 corroborated our argument that the
theoretical model of copy trading in a social trading environment on the
dual-partitioning of signaling theory (Wohlgemuth et al., 2016) requires
the addition of a third set of signals, namely, community-based signals.
Compared to the condition with only affect-based and cognitive-based
signals (C15), the introduction of community-based signals signifi­
cantly changed the preferences toward those signals (C16 and C17).
Thus H3 is also approved.
5. Conclusion
In sum, our research produces new knowledge on the factors driving
copy trading decisions in social trading environments (Ammann &
Schaub, 2016; Kromidha & Li, 2019; Pan et al., 2012; Pelster, 2018;
Röder & Walter, 2019; Wohlgemuth et al., 2016). We have examined the
importance and the effect of community-based signals when choosing a
LT to copy to make investment decisions in a social trading community.
By conducting a two-alternative forced-choice experimental design, we
investigated the copy trading decisions of working adults in a mock-up
social trading environment. We studied the investment decisions in
several conditions and by several testing approaches. The results sys­
tematically show the importance of community-based signals, their
potential to influence investment decisions, and the general preference
toward positive community-based signals. Thus, our results are in line
with studies showing the importance of social influence and herding (e.
g., Kromidha & Li, 2019; Pan et al., 2012), but complement these studies
by systematically and separately investigating the effects of
community-based signals in choosing a trader to follow in online in­
vestment communities. Additionally, results also indicate that when
cognition-based and affect-based signals are both positive or negative, it
may not matter if the additional community-based signals are positive or
negative, the information-rich option is preferred. We argue that this
may be because community-based signals are so important that even a
95.0% Confidence Interval
Estimate Lower Upper Test Statistics
0.795 0.710 0.864 93.0***(5.408)
0.838 0.758 0.899 98.0***(5.408)
0.752 0.664 0.827 88.0***(5.408)
0.701 0.609 0.782 82.0***(5.408)
S. Erdős et al. Journal of Behavioral and Experimental Economics 97 (2022) 101847

Table 6
The results of exact one-sample binomial tests with exact Clopper-Pearson 95% CI on the proportion of subjects choosing options A and B in the case of conditions C7-
C14.
Conditions 95.0% Confidence Interval

Option A Option B Parameter Estimate Lower Upper Test Statistics

C7 PP PPP Probability(selected=B) 0.897 0.828 0.946 105.0***(5.408)

C8 PP PPN Probability(selected=B) 0.812 0.729 0.878 95.0***(5.408)
C9 NP NPP Probability(selected=B) 0.752 0.664 0.827 88.0***(5.408)
C10 NP NPN Probability (selected=B) 0.385 0.296 0.479 45.0** (5.408)
C11 PN PNP Probability (selected=B) 0.838 0.758 0.899 98.0*** (5.408)
C12 PN PNN Probability (selected=B) 0.376 0.288 0.470 44.0** (5.408)
C13 NN NNP Probability (selected=B) 0.880 0.807 0.933 103.0***(5.408)
C14 NN NNN Probability (selected=B) 0.607 0.512 0.696 71.0** (5.408)

Note: The number of respondents = 117, standard errors in parentheses.

*p < .05, **p < .01, *** p < .001.

relatively weak signal is preferred over an information lean situation.
Future research should corroborate this assumption.
The main theoretical implication of this study is that signaling
theory-based models of copy trading decisions should be expanded by a
separate set of signals, namely community-based signals stemming from
other copy traders of the social trading community. In addition, our
findings have implications for social trading platforms and their users as
well. Platforms could use our findings to design the appearance of the
information they provide on their website to spur copy trading. Our
results also help copy traders recognize the signals that influence their
attention when making copy trading decisions. By understanding the
factors that influence the attention that LTs receive, copy traders may
evaluate LTs more cautiously. Also, policymakers should promote pro­
grams to increase laypeople’s financial literacy and self-efficacy to help
them make sound financial decisions that serve their self-interest and
avoid herding that can lead to copying low-performing traders.
Finally, we have to mention the limitations of our study. In our
experiment, participants did not get any incentives. It would be
interesting to see whether the same decisions were made if the partici­
pants were financially motivated. Our study did not address the relative
importance of signals within community-based signals as well. Future
research might explore whether some community-based signals were
more important than others. Also, analyzing decision times and eye-
tracking would add valuable information to this study. Finally, using a
more extensive and varied sample would be valuable to corroborate the
results as well.
Declarations of competing interest
None
Funding
Project no. TKP2020-IKA-08 has been implemented with the support
provided by the National Research, Development and Innovation Fund
of Hungary, financed under the 2020–4.1.1-TKP2020 funding scheme.

Appendix A. Game description given to each participant

This is a social trading platform where everyone can create a profile that others can follow and copy. You wish to invest your money as a member of
this community, so you have the opportunity to copy the investment strategies of experienced investors. During the experiment, you will be requested
to select investors whose portfolios you would like to copy in the future in order to maximize the return on your investments. In the simulation, you
will have to choose between two leading investors in a total of 18 cases. Please always choose the leading investor whose investment strategy you
would prefer to copy to increase your investment performance. For each copy decision, you will copy the portfolio of the selected leader investor by
100 XP.
In each case, the following nine pieces of information are available to help your decision:

Information Description of the information

Name Real full name or chosen nickname of the leader investor
Profile picture Photo of the leader investor that is not required to be shared in the network
Activity level Number of login days in the last two years
Success rate of transactions The proportion of profitable transactions in total transactions
Return Return on the total amount invested
Maximum profit achieved The highest return that the investor has ever achieved on a transaction
Number of copiers The number of users currently copy the leader investor’s portfolio
Invested amount The amount by which the portfolio of the leader investor is copied
Number of followers Number of users following the activity of leader investor, but not copying it

Thank you for your participation in our experiment!

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