Synchronicity, Instant Messaging and Performance among Financial Traders

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 to 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, the less likely they 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 suggests that synchronicity and vanguard technology may help cope with risky decisions in complex systems and furnish new prospects for achieving collective and individual goals

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

Theory purports that animal foraging choices evolve to maximize returns, such as net energy intake. Empirical research in both human and nonhuman animals reveals that individuals often attend to the foraging choices of their competitors while making their own foraging choices. Due 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 analyze 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

Structural balance emerges and explains performance in risky decision-making.

Polarization affects many forms of social organization. A key issue focuses on which affective relationships are prone to change and how their change relates to performance. In this study, we analyze a financial institutional over a two-year period that employed 66 day traders, focusing on links between changes in affective relations and trading performance. Traders' affective relations were inferred from their IMs (>2 million messages) and trading performance was measured from profit and loss statements (>1 million trades). Here, we find that triads of relationships, the building blocks of larger social structures, have a propensity towards affective balance, but one unbalanced configuration resists change. Further, balance is positively related to performance. Traders with balanced networks have the "hot hand", showing streaks of high performance. Research implications focus on how changes in polarization relate to performance and polarized states can depolarize

Quality of care and interhospital collaboration: a study of patient transfers in Italy.

OBJECTIVES: We examine the dynamics of patient-sharing relations within an Italian regional community of 35 hospitals serving approximately 1,300,000 people. We test whether interorganizational relations provide individual patients access to higher quality providers of care. RESEARCH DESIGN AND METHODS: We reconstruct the complete temporal sequence of the 3461 consecutive interhospital patient-sharing events observed between each pair of hospitals in the community during 2005-2008. We distinguish between transfers occurring between and within different medical specialties. We estimate newly derived models for relational event sequences that allow us to control for the most common forms of network-like dependencies that are known to characterize collaborative relations between hospitals. We use 45-day risk-adjusted readmission rate as a proxy for hospital quality. RESULTS: After controls (eg, geographical distance, size, and the existence of prior collaborative relations), we find that patients flow from less to more capable hospitals. We show that this result holds for patient being shared both between as well as within medical specialties. Nonetheless there are strong and persistent other organizational and relational effects driving transfers. CONCLUSIONS: Decentralized patient-sharing decisions taken by the 35 hospitals give rise to a system of collaborative interorganizational arrangements that allow the patient to access hospitals delivering a higher quality of care. This result is relevant for health care policy because it suggests that collaborative relations between hospitals may produce desirable outcomes both for individual patients, and for regional health care systems

Stock fluctuations are correlated and amplified across networks of interlocking directorates

Traded corporations are required by law to have a majority of outside directors on their board. This requirement allows the existence of directors who sit on the board of two or more corporations at the same time, generating what is commonly known as interlocking directorates. While research has shown that networks of interlocking directorates facilitate the transmission of information between corporations, little is known about the extent to which such interlocking networks can explain the fluctuations of stock price returns. Yet, this is a special concern since the risk of amplifying stock fluctuations is latent. To answer this question, here we analyze the board composition, traders’ perception, and stock performance of more than 1,500 US traded corporations from 2007-2011. First, we find that the fewer degrees of separation between two corporations in the interlocking network, the stronger the temporal correlation between their stock price returns. Second, we find that the centrality of traded corporations in the interlocking network correlates with the frequency at which financial traders talk about such corporations, and this frequency is in turn proportional to the corresponding traded volume. Third, we show that the centrality of corporations was negatively associated with their stock performance in 2008, the year of the big financial crash. These results suggest that the strategic decisions made by interlocking directorates are strongly followed by stock analysts and have the potential to correlate and amplify the movement of stock prices during financial crashes. These results may have relevant implications for scholars, investors, and regulators

Commitment, Learning, and Alliance Performance: A Formal Analysis Using an Agent-Based Network Formation Model

Current theoretical arguments highlight a dilemma faced by actors who either adopt a weak or strong commitment strategy for managing their alliances and partnerships. Actors who pursue a weak commitment strategy|i.e. immediately abandon current partners when a more pro table alternative is presented|are more likely to identify the most rewarding alliances. On the other hand, actors who enact a strong commitment approach are more likely to take advantage of whatever opportunities can be found in existing partnerships. Using agent-based modeling, we show that actors who adopt a moderate commitment strategy overcome this dilemma and outperform actors who adopt either weak or strong commitment approaches. We also show that avoiding this dilemma rests on experiencing a related tradeo : moderately-committed actors sacri ce short-term performance for the superior knowledge and information that allows them to eventually do better

Communities, Knowledge Creation, and Information Diffusion

In this paper, we examine how patterns of scientific collaboration contribute to knowledge creation. Recent studies have shown that scientists can benefit from their position within collaborative networks by being able to receive more information of better quality in a timely fashion, and by presiding over communication between collaborators. Here we focus on the tendency of scientists to cluster into tightly-knit communities, and discuss the implications of this tendency for scientific performance. We begin by reviewing a new method for finding communities, and we then assess its benefits in terms of computation time and accuracy. While communities often serve as a taxonomic scheme to map knowledge domains, they also affect how successfully scientists engage in the creation of new knowledge. By drawing on the longstanding debate on the relative benefits of social cohesion and brokerage, we discuss the conditions that facilitate collaborations among scientists within or across communities. We show that successful scientific production occurs within communities when scientists have cohesive collaborations with others from the same knowledge domain, and across communities when scientists intermediate among otherwise disconnected collaborators from different knowledge domains. We also discuss the implications of communities for information diffusion, and show how traditional epidemiological approaches need to be refined to take knowledge heterogeneity into account and preserve the system's ability to promote creative processes of novel recombinations of idea

A new governance approach for multi-firm projects: lessons from Olkiluoto 3 and Flamanville 3 nuclear power plant projects

We analyze governance in two contemporary nuclear power plant projects: Olkiluoto 3 (Finland) and Flamanville 3 (France). We suggest that in the governance of large multi-firm projects, any of the prevalent governance approaches that rely on market, hierarchy, or hybrid forms, is not adequate as such. This paper opens up avenues towards a novel theory of governance in large projects by adopting a project network view with multiple networked firms within a single project, and by simultaneously going beyond organizational forms that cut across the traditional firm–market dichotomy. Our analysis suggests four changes in the prevailing perspective towards the governance of large projects. First, there should be a shift from viewing multi-firm projects as hierarchical contract organizations to viewing them as supply networks characterized by a complex and networked organizational structure. Second, there should be a shift in the emphasis of the predominant modes of governance, market and hierarchy towards novel governance approaches that emphasize network-level mechanisms such as self-regulation within the project. Third, there should be a shift from viewing projects as temporary endeavors to viewing projects as short-term events or episodes embedded in the long-term sphere of shared history and expected future activities among the involved actors. Fourth, there should be a shift from the prevailing narrow view of a hierarchical project management system towards an open system view of managing in complex and challenging institutional environments