This March, researchers from MIT will give a total of one million dollars cash to 10,000 Asian students–$100 each–to invest in the Hong Kong and Singapore stock markets. Why the mass payday? Because the researchers want to demonstrate that, under the right circumstances, social networks improve the way we make financial decisions.
Using eToro, the world’s largest social platform for online trading, as their experimental field, Dr. Yaniv Altshuler and Dr. Alex “Sandy” Pentland, from MIT, want to see what happens when …. The study is sponsored by InfoCast, IBM, Hutchinson and eToro itself. And some students from MIT and Stanford will also take part, in addition to the Asian participants.
“The interesting thing about eToro is that they give you this twitter-like service where you can follow other users with your money, says
Altshuler truly believes his study will show that connecting with other traders, thus collectivizing financial decision-making, is beneficial. He says that, although previous studies from universities like Rice University, have shown that these types of social networks can actually be harmful, he thinks eToro, when used in combination with their “tuning techniques,” will yield different results. According to Altshuler, eToro’s network hits the “sweet spot” where….
Last March, Altshuler’s team gave $20 to 6000 eToro users. Each user was also given a specific recommendation as to how they should spent the money. Some were told to copy the trading behaviours of what eToro users agreed were the “best” traders and some were given control recommendations, where they were told to copy the trading transactions of ordinary eToro users.
“The results were amazing,” says Altshuler. “They showed an increase of nearly 6% in RIY”….”And people who copied the best traders yielded only half of the improvements….”
This field test convince Althuler and Pentland that the study needed to be expanded. So now Altshuler will be writing cheques to 10,000 students, making it the largest experiment of its kind.
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