/ #stock market #Human behavior 

Financial markets as empirical labs to study the evolving ecology of human decision making

Human decision making strategies evolve through time based on past experience and they are influence by the spectrum of other strategies with which they come into contact. Financial markets provide the best empirical lab to understand how human decide under risk and uncertainty. They are complex systems which provide massive datasets of detail records of human decisions which constantly evolve and collide in centralized or social structures. Furthermore financial markets provide us with a very simple measure of performance (profits, ROI), thus enabling us to study the relationship between human decision making strategies and performance. During the last year we have studied those systems to understand the regularities of how agents in financial markets analyze the information and perform their decisions. In the past and due to agreements with the Spanish and London Stock market we found that different institutions/agents have different strategies in the market, do have different impact in the price at small time scales or optimize the trading of their large orders in different way.

More recently, we have been studying new or non-traditional financial venues, like the social trading platform eToro or the evolution of crypto-currencies. We found that agents in social trading platforms do suffer from the same cognitive limitations as human in other social venues (social networks for example) and that limits the potential performance of them in those platforms. Finally, we have put to test one of the most traditional hypothesis of financial markets in the trading of new crypto-currencies: the fact that their price reflects all the information available to them. Analysing thousands of forums about those e-coins we found that the volatility of them is actually related to the level, quality and technicality of that discussion.

Some recent papers:

  • ScamCoins, S*** Posters, and the Search for the Next Bitcoin TM : Collective Sensemaking in Cryptocurrency Discussions
    Eaman Jahani, Peter M Krafft, Yoshihiko Suhara, Esteban Moro, Alex Sandy Pentland
    Proceedings of the ACM on Human-Computer Interaction 2 79–28 (2018)
    PDF Journal Altmetric: 9

  • Market impact and trading profile of hidden orders in stock markets.
    Esteban Moro, Javier Vicente, Luis G Moyano, Austin Gerig, J Doyne Farmer, Gabriella Vaglica, Fabrizio Lillo, Rosario N Mantegna
    Physical review E, Statistical, nonlinear, and soft matter physics 80 066102 (2009)
    PDF Journal

  • Specialization and herding behavior of trading firms in a financial market
    Fabrizio Lillo, Esteban Moro, Gabriella Vaglica, Rosario N Mantegna
    New Journal of Physics 10 043019 (2008)
    PDF Journal Altmetric: 2

  • Scaling laws of strategic behavior and size heterogeneity in agent dynamics.
    Gabriella Vaglica, Fabrizio Lillo, Esteban Moro, Rosario N Mantegna
    Physical review E, Statistical, nonlinear, and soft matter physics 77 036110 (2008)
    PDF Journal

Talks:

Videos:

Media:

Author

Esteban Moro

Professor at Universidad Carlos III de Madrid and MIT Medialab. Working on Complex Systems, Social Networks and Urban Science.