A wave of recent literature documents the influence of technology on investor behaviour. For example, Loos et al. (2020) show how robo-advice has the potential to reduce investment biases and improve portfolio performance. And Cen (2019) shows that, after introduction to a mobile trading app, investors’ flows into mutual funds become more volatile and more sensitive to short-term fund returns and market sentiment.

A new NBER working paper measures how behaviours such as risk-taking, preference for lottery stocks and trend chasing vary depending on whether investors use a smartphone to trade. Using transaction-level data from two German banks, they follow investor behaviour within a month, across different platforms (smartphone vs non-smartphone) over a seven-year period. They find:

The probability of purchasing risky assets increases in smartphone trades vs non-smartphone ones, and smartphone trades involve assets with higher volatility and more positive skewness.
Smartphones increase the probability of buying assets in the top decile of the past performance distribution, indicating a greater tendency to chase past returns.
Smartphones also increase the probability of purchasing lottery-type assets (stocks with below-median price and above-median volatility and skewness).

These findings are accentuated during ‘out of hours’ trading, which suggests investors are more prone to making risky trades and chasing trending stocks on smartphones in the evening.