Synchronicity, instant messaging, and performance among financial traders

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Publication Details

Output type: Journal article

Author list: Saavedra S, Hagerty K, Uzzi B

Publisher: National Academy of Sciences

Publication year: 2011

Journal: Proceedings of the National Academy of Sciences (0027-8424)

Volume number: 108

Issue number: 13

Start page: 5296

End page: 5301

Number of pages: 6

ISSN: 0027-8424

eISSN: 1091-6490

Languages: English-Great Britain (EN-GB)

Unpaywall Data

Open access status: green

Full text URL: https://europepmc.org/articles/pmc3069203?pdf=render

Abstract

Successful animal systems often manage risk through synchronous behavior that spontaneously arises without leadership. In critical human systems facing risk, such as financial markets or military operations, our understanding of the benefits associated with synchronicity is nascent but promising. Building on previous work illuminating commonalities between ecological and human systems, we compare the activity patterns of individual financial traders with the simultaneous activity of other traders-an individual and spontaneous characteristic we call synchronous trading. Additionally, we examine the association of synchronous trading with individual performance and communication patterns. Analyzing empirical data on day traders' second-to-second trading and instant messaging, we find that the higher the traders' synchronous trading is, the less likely they are to lose money at the end of the day. We also find that the daily instant messaging patterns of traders are closely associated with their level of synchronous trading. This result suggests that synchronicity and vanguard technology may help traders cope with risky decisions in complex systems and may furnish unique prospects for achieving collective and individual goals.

Keywords

collective human behavior, crowds, data mining, social networks

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