Researchers at the MIT have released research on social trading behaviour within the eToro investment network.

According to MIT researcher Dr. Yaniv Altshuler's findings, providing the name of a specific `guru’ to copy enabled online traders to uplift earnings by six to ten per cent compared with trades used without social networks and four per cent when compared with unguided copying where copied gurus were selected without the benefit of a specific recommendation.

Normally in social trading networks individual traders pick and choose their own traders to copy based on a number of factors including instrument traded, risk levels, gain and percent of positive returns. For this research, 6,000 active traders were each provided with the opportunity to use a $20 coupon to copy a specific guru on the eToro network. Matches between targeted traders and gurus were based on an algorithm designed to maximise gains throughout the trading network. Other control groups that showed much smaller trading performance increases were traders who copied gurus with the highest returns, and a group where recommended traders were randomly selected without the benefit of using the algorithm.

"Social trading is now going through a process of evolution making it more powerful than ever," says eToro CEO, Jonathan Assia. "We are thrilled to finally have proof from a world renowned research institute like MIT Media Lab that social trading yields higher returns than individual trading. This validates our core value in which we believe that profits are linked to the wisdom of the crowds.”

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