Instant-Messaging Networks and the Collective Genius of Profitable Day Traders

Serguei Saavedra 

Wednesdays@NICO Seminar, Noon, January 20 2010, Chambers Hall, Lower Level

Dr. Serguei Saavedra, Northwestern University

Abstract

Synchronicity has been called one of the most pervasive and mysterious drives in all of nature. We demonstrate non-trivial synchronous behavior among stock traders and its association with their end-of-the-day profitability. We analyzed unique, fine-grained stock trader data on over 2 million instant messages and 1 million moment-to-moment trades for two years. We found that independent traders experience periods of simultaneous trading despite the fact that they trade different stocks – a collective behavior we call trade-sync. Trade-sync and profits appear to be non-obviously and non-monotonically associated. Trade-sync increases profits up to a threshold and then its effects reverse. Sync is brought into being by the separate instant-messaging activity of the traders – a coupling mechanism we call network-tuning. We discuss the implication of trade-sync and network-tuning for other consequential human systems that face uncertainty and that defy the abilities of leaders to induce collective benefits.   

Biography

Serguei is a post-doctoral fellow at NICO and Kellogg School of Manage-ment. He joined NICO after obtaining his PhD in Engineering Sciences from Oxford University and working as a post-doctoral fellow at the Said Busi-ness School. His work has been focused on understanding the ecology of collective human behavior. He follows a multidisciplinary approach that combines ecological research, network theory and statistical physics to ana-lyze the cooperative and competitive patterns among individuals. physics to analyze the cooperative and competitive patterns among individuals.