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Decrypting Financial Markets through E-Joint Attention Efforts: On-Line Adaptive Networks of Investors in Periods of Market Uncertainty.

Casnici N, Dondio P, Casarin R, Squazzoni F - PLoS ONE (2015)

Bottom Line: By measuring the investors' expertise, we found that their behaviour could help predict changes in daily stock returns.We also found that expert investors were more influential in communication processes during high volatility market phases, whereas they had less influence on the real-time forum's reaction after bad news.Our findings confirm the crucial role of e-communication platforms.

View Article: PubMed Central - PubMed

Affiliation: Department of Clinical and Experimental Sciences, University of Brescia, Brescia, Italy.

ABSTRACT
This paper looks at 800,000 messages on the Unicredit stock, exchanged by 7,500 investors in the Finanzaonline.com forum, between 2005 and 2012 and measured collective interpretations of stock market trends. We examined the correlation patterns between market uncertainty, bad news and investors' network structure by measuring the investors' communication patterns. Our results showed that the investors' network reacted to market trends in different ways: While less turbulent market phases implied less communication, higher market volatility generated more complex communication patterns. While the information content of messages was less technical in situations of uncertainty, bad news caused more informative messages only when market volatility was lower. This meant that bad news had a different impact on network behaviour, depending on market uncertainty. By measuring the investors' expertise, we found that their behaviour could help predict changes in daily stock returns. We also found that expert investors were more influential in communication processes during high volatility market phases, whereas they had less influence on the real-time forum's reaction after bad news. Our findings confirm the crucial role of e-communication platforms. However, they also show the need to reconsider the fragility of these collective intelligence systems when under external shocks.

No MeSH data available.


Related in: MedlinePlus

The daily number of messages on Unicredit from 2005 to 2012 (Mt).
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pone.0133712.g001: The daily number of messages on Unicredit from 2005 to 2012 (Mt).

Mentions: First, we considered the volume of messages (Mt), the number of nodes (Nt) and the number of edges (Gt) as daily indicators to measure the information exchange activity on the Unicredit stock in the forum. Fig 1 shows the time series of messages about Unicredit from 2005 to 2012. It is worth noting that messages significantly increased in the period 2005–2007, when the bank expanded rapidly both at an international (i.e., merging with HVB and BA-CA groups) and national level (i.e., merging with Capitalia). The series showed high volatility with three peaks in late 2008 and 2011. At the end of September 2008, the Unicredit stock fell 29% and the board of directors decided to increase capital. The negative trend for the stock continued until March 2009. Given the high volatility of the stock at the end of 2011, the board of directors undertook another capital increase at the beginning of 2012. In this period, Unicredit stock lost more than 35% of its value in only three days (one of the last peaks in Fig 1 was associated with this event).


Decrypting Financial Markets through E-Joint Attention Efforts: On-Line Adaptive Networks of Investors in Periods of Market Uncertainty.

Casnici N, Dondio P, Casarin R, Squazzoni F - PLoS ONE (2015)

The daily number of messages on Unicredit from 2005 to 2012 (Mt).
© Copyright Policy
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC4526688&req=5

pone.0133712.g001: The daily number of messages on Unicredit from 2005 to 2012 (Mt).
Mentions: First, we considered the volume of messages (Mt), the number of nodes (Nt) and the number of edges (Gt) as daily indicators to measure the information exchange activity on the Unicredit stock in the forum. Fig 1 shows the time series of messages about Unicredit from 2005 to 2012. It is worth noting that messages significantly increased in the period 2005–2007, when the bank expanded rapidly both at an international (i.e., merging with HVB and BA-CA groups) and national level (i.e., merging with Capitalia). The series showed high volatility with three peaks in late 2008 and 2011. At the end of September 2008, the Unicredit stock fell 29% and the board of directors decided to increase capital. The negative trend for the stock continued until March 2009. Given the high volatility of the stock at the end of 2011, the board of directors undertook another capital increase at the beginning of 2012. In this period, Unicredit stock lost more than 35% of its value in only three days (one of the last peaks in Fig 1 was associated with this event).

Bottom Line: By measuring the investors' expertise, we found that their behaviour could help predict changes in daily stock returns.We also found that expert investors were more influential in communication processes during high volatility market phases, whereas they had less influence on the real-time forum's reaction after bad news.Our findings confirm the crucial role of e-communication platforms.

View Article: PubMed Central - PubMed

Affiliation: Department of Clinical and Experimental Sciences, University of Brescia, Brescia, Italy.

ABSTRACT
This paper looks at 800,000 messages on the Unicredit stock, exchanged by 7,500 investors in the Finanzaonline.com forum, between 2005 and 2012 and measured collective interpretations of stock market trends. We examined the correlation patterns between market uncertainty, bad news and investors' network structure by measuring the investors' communication patterns. Our results showed that the investors' network reacted to market trends in different ways: While less turbulent market phases implied less communication, higher market volatility generated more complex communication patterns. While the information content of messages was less technical in situations of uncertainty, bad news caused more informative messages only when market volatility was lower. This meant that bad news had a different impact on network behaviour, depending on market uncertainty. By measuring the investors' expertise, we found that their behaviour could help predict changes in daily stock returns. We also found that expert investors were more influential in communication processes during high volatility market phases, whereas they had less influence on the real-time forum's reaction after bad news. Our findings confirm the crucial role of e-communication platforms. However, they also show the need to reconsider the fragility of these collective intelligence systems when under external shocks.

No MeSH data available.


Related in: MedlinePlus