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Facebook Finance: How Social Interaction Propagates Active Investing
This paper shows how active investing strategies propagate through social connections in a network of retail traders, using a new database of social activity linked to individual-level trading records. A trader?s good short-term performance causes them to contact others. A trader?s activity increases when peers perform well and increase communication. We use the staggered entry of brokerages into partnerships with the social networking platform, which is a necessary precursor for traders to access the network, to argue these effects are causal. This pattern of communication supports active ...