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

Niccolò Casnici; Pierpaolo Dondio; Roberto Casarin; Flaminio Squazzoni

doi:10.1371/journal.pone.0133712

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

PLoS One. 2015 Aug 5;10(8):e0133712. doi: 10.1371/journal.pone.0133712. eCollection 2015.

Authors

Niccolò Casnici¹, Pierpaolo Dondio², Roberto Casarin³, Flaminio Squazzoni⁴

Affiliations

¹ Department of Clinical and Experimental Sciences, University of Brescia, Brescia, Italy.
² School of Computing, Dublin Institute of Technology, Dublin, Ireland.
³ Department of Economics, University Ca' Foscari, Venice, Italy.
⁴ Department of Economics and Management, 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.

Publication types

Research Support, Non-U.S. Gov't

MeSH terms

Attention
Commerce* / methods
Communication*
Cooperative Behavior
Humans
Social Media*
Uncertainty

Grants and funding

Roberto Casarin was financially supported by the European Union, Seventh Framework Programme FP7/2007-2013 under grant agreement SYRTO-SSH-2012-320270, the Global Risk Institute in Financial Services and the Institut Europlace de Finance, Systemic Risk grant, and by the Italian Ministry of Education, University and Research (MIUR) PRIN 2010-11 grant MISURA, and the European Commission Collaborative Project SYRTO (http://syrtoproject.eu/). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.