Abstract
This study examines the skill level of online traders investing in CFDs with help of bootstrap simulations. For this investigation, we orientate towards the paper of Fama and French (2010) in terms of the methodology for our social trading data set. Our data set from one of the largest social trading platforms in Germany allows us to analyse if skill exists among non-professional retail investors and hence, if investment talent prevails. We define traders as skilled when they are able to cover all costs related to their investments. Thereby, we reveal that in the aggregate, social traders are not skilled with regards to net returns. While this study suggests that investing in social trading does not pay off, we detect skilled social traders that are hidden by the large amount of unskilled social trading investors. For this reason, investors with already a small amount of skill are very valuable within an investment field of unprofessional retail investors. Therefore, we show that the selection of a social trader should be carefully motivated.
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