Published in ScienceNOW, 17 Mar 2011
Phones incessantly ringing, people shouting “Buy! Sell!” across the office, prices flashing across computer screens—it looks like chaos. But stock trading firms are actually home to a remarkable harmony, according to a new study. Researchers have found that, in at least one firm, traders synchronize their buying and selling behavior with amazing precision. And that seems to tie in with greater profits.
Sociologist Brian Uzzi of Northwestern University in Evanston, Illinois, and colleagues analyzed all trades taking place in a single firm of 66 employees over 2 years. As is usual in trading firms, the employees specialized in different markets—housing, autos, or health care, for example—so they had no obvious incentive to copy one another’s behavior. Each trader typically bought or sold stocks about 80 times a day, which the researchers allotted to second-long time windows. […]
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