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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 degree of investors’ participation in the three volatility phases.Blue bars indicate the average number of messages, purple bars show the average number of investors active in the forum, green bars show the average number of ties between the investors.
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pone.0133712.g003: The degree of investors’ participation in the three volatility phases.Blue bars indicate the average number of messages, purple bars show the average number of investors active in the forum, green bars show the average number of ties between the investors.

Mentions: Our initial results indicate that the network activity was strongly influenced by market volatility regimes. In situations of high volatility, more investors were active on the forum and communicated more by establishing more ties with each other (see Fig 3). Higher volatility also attracted higher participation by expert investors (see Fig 4), whose social prestige tended to increase during high volatility situations. Furthermore, high volatility decreased the information content of messages, which tended to systematically change from more technical and analytical to more residual content when volatility increased (see Fig 5). On the other hand, market volatility did not change the network’s structure, i.e., stability and fragmentation. It is worth noting that the number of sub-groups was higher in situations of high volatility, also due to the higher number of investors involved, but the strength of the inter-group separation did not change.


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 degree of investors’ participation in the three volatility phases.Blue bars indicate the average number of messages, purple bars show the average number of investors active in the forum, green bars show the average number of ties between the investors.
© Copyright Policy
Related In: Results  -  Collection

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

pone.0133712.g003: The degree of investors’ participation in the three volatility phases.Blue bars indicate the average number of messages, purple bars show the average number of investors active in the forum, green bars show the average number of ties between the investors.
Mentions: Our initial results indicate that the network activity was strongly influenced by market volatility regimes. In situations of high volatility, more investors were active on the forum and communicated more by establishing more ties with each other (see Fig 3). Higher volatility also attracted higher participation by expert investors (see Fig 4), whose social prestige tended to increase during high volatility situations. Furthermore, high volatility decreased the information content of messages, which tended to systematically change from more technical and analytical to more residual content when volatility increased (see Fig 5). On the other hand, market volatility did not change the network’s structure, i.e., stability and fragmentation. It is worth noting that the number of sub-groups was higher in situations of high volatility, also due to the higher number of investors involved, but the strength of the inter-group separation did not change.

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