Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network
In this paper, we study roles of social mechanisms in a financial system. Our data come from a novel on-line foreign exchange trading brokerage for individual investors, which also allows investors to form social network ties between each other and copy others' trades. From the dataset, we anal...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Institute of Electrical and Electronics Engineers (IEEE)
2013
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| Online Access: | http://hdl.handle.net/1721.1/80764 https://orcid.org/0000-0002-8053-9983 https://orcid.org/0000-0002-3410-9587 |
| _version_ | 1826189105329864704 |
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| author | Pan, Wei Altshuler, Yaniv Pentland, Alex Paul |
| author2 | Massachusetts Institute of Technology. Media Laboratory |
| author_facet | Massachusetts Institute of Technology. Media Laboratory Pan, Wei Altshuler, Yaniv Pentland, Alex Paul |
| author_sort | Pan, Wei |
| collection | MIT |
| description | In this paper, we study roles of social mechanisms in a financial system. Our data come from a novel on-line foreign exchange trading brokerage for individual investors, which also allows investors to form social network ties between each other and copy others' trades. From the dataset, we analyze the dynamics of this connected social influence systems in decision making processes. We discover that generally social trades outperform individual trades, but the social reputation of the top traders is not completely determined by their performance due to social feedback even when users are betting their own money. We also find that social influence plays a significant role in users' trades, especially decisions during periods of uncertainty. We report evidences suggesting that the dynamics of social influence contribute to market overreaction. |
| first_indexed | 2024-09-23T08:09:36Z |
| format | Article |
| id | mit-1721.1/80764 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T08:09:36Z |
| publishDate | 2013 |
| publisher | Institute of Electrical and Electronics Engineers (IEEE) |
| record_format | dspace |
| spelling | mit-1721.1/807642022-09-23T11:18:29Z Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network Pan, Wei Altshuler, Yaniv Pentland, Alex Paul Massachusetts Institute of Technology. Media Laboratory Program in Media Arts and Sciences (Massachusetts Institute of Technology) Pan, Wei Altshuler, Yaniv Pentland, Alex Paul In this paper, we study roles of social mechanisms in a financial system. Our data come from a novel on-line foreign exchange trading brokerage for individual investors, which also allows investors to form social network ties between each other and copy others' trades. From the dataset, we analyze the dynamics of this connected social influence systems in decision making processes. We discover that generally social trades outperform individual trades, but the social reputation of the top traders is not completely determined by their performance due to social feedback even when users are betting their own money. We also find that social influence plays a significant role in users' trades, especially decisions during periods of uncertainty. We report evidences suggesting that the dynamics of social influence contribute to market overreaction. 2013-09-16T20:10:18Z 2013-09-16T20:10:18Z 2012-09 Article http://purl.org/eprint/type/ConferencePaper 978-1-4673-5638-1 978-0-7695-4848-7 http://hdl.handle.net/1721.1/80764 Pan, Wei, Yaniv Altshuler, and Alex (Sandy) Pentland. “Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network.” In 2012 International Conference on Privacy, Security, Risk and Trust and 2012 International Confernece on Social Computing, 203-209. Institute of Electrical and Electronics Engineers, 2012. https://orcid.org/0000-0002-8053-9983 https://orcid.org/0000-0002-3410-9587 en_US http://dx.doi.org/10.1109/SocialCom-PASSAT.2012.133 2012 International Conference on Privacy, Security, Risk and Trust and 2012 International Confernece on Social Computing Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf Institute of Electrical and Electronics Engineers (IEEE) MIT Web Domain |
| spellingShingle | Pan, Wei Altshuler, Yaniv Pentland, Alex Paul Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title | Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title_full | Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title_fullStr | Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title_full_unstemmed | Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title_short | Decoding Social Influence and the Wisdom of the Crowd in Financial Trading Network |
| title_sort | decoding social influence and the wisdom of the crowd in financial trading network |
| url | http://hdl.handle.net/1721.1/80764 https://orcid.org/0000-0002-8053-9983 https://orcid.org/0000-0002-3410-9587 |
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