Foraging under conditions of short-term exploitative competition: the case of stock traders

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Publication Details

Output type: Journal article

Author list: Saavedra S, Malmgren RD, Switanek N, Uzzi B

Publisher: The Royal Society

Publication year: 2013

Journal: Proceedings of the Royal Society B: Biological Sciences (0962-8452)

Volume number: 280

Issue number: 1755

ISSN: 0962-8452

eISSN: 1471-2954

Languages: English-Great Britain (EN-GB)

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Open access status: bronze

Full text URL: https://royalsocietypublishing.org/doi/pdf/10.1098/rspb.2012.2901

Abstract

Theory purports that animal foraging choices evolve to maximize returns, such as net energy intake. Empirical research in both human and non-human animals reveals that individuals often attend to the foraging choices of their competitors while making their own foraging choices. Owing to the complications of gathering field data or constructing experiments, however, broad facts relating theoretically optimal and empirically realized foraging choices are only now emerging. Here, we analyse foraging choices of a cohort of professional day traders who must choose between trading the same stock multiple times in a row-patch exploitation-or switching to a different stock-patch exploration-with potentially higher returns. We measure the difference between a trader's resource intake and the competitors' expected intake within a short period of time-a difference we call short-term comparative returns. We find that traders' choices can be explained by foraging heuristics that maximize their daily short-term comparative returns. However, we find no one-best relationship between different trading choices and net income intake. This suggests that traders' choices can be short-term win oriented and, paradoxically, maybe maladaptive for absolute market returns.

Keywords

foraging, human activity, maladaptive behaviour, short-term competition

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