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Does a scopic regime produce conformism? Herding behavior among trade leaders on social trading platforms

Research output: Contribution to journalArticle

Original languageEnglish
Pages (from-to)1144-1175
Number of pages36
JournalEuropean Journal Of Finance
Issue number14
Early online date4 Dec 2017
Publication statusPublished - 2018


  • Does a Scopic Regime_GEMAYEL_Publishedonline4December2017_GREEN AAM

    Does_a_Scopic_Regime_GEMAYEL_Publishedonline4December2017_GREEN_AAM.pdf, 393 KB, application/pdf


    Accepted author manuscript

    This is an Accepted Manuscript of an article published online by Taylor & Francis in The European Journal of Finance on December 4 2017, available online:

King's Authors


Social trading platforms (STPs) are transparent online markets governed by a scopic regime, where order flow is publicly disclosed and participants are subject to constant reciprocal scrutiny. Participants on STPs can be categorized into trade leaders and copiers, where the former execute unique trades and manage the funds allocated to them by the latter in return for compensation. Given limited individual capacity and the competition to attract copiers, we investigate whether the scopic regime produces excess and perpetual conformism among trade leaders. Using data from a popular STP, and from an anonymous traditional foreign exchange broker, we show that the scopic regime produces excess levels of herding. Under the scopic environment, we find that herding is high when market information is scarce, which is evidence of herding due to informational cascades. We find herding to be relatively low among risk-seeking trade leaders, which may be a sign of overconfidence. Herding is high for larger trades, suggesting that traders herd to avoid the disappointment associated with underperforming on large positions. Finally, we show that herding in the scopic environment persists at much higher levels compared to traditional environments. Our findings indicate that exposure to a scopic information-rich environment augments the limitations and personal biases of individual traders, thus producing excess and perpetual herding.

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