User:Gnotisauton/Socially Influenced Market Behaviour

Socially Influenced Market Behaviour

Isaac Newton, after he had lost a staggering 20,000 pounds in the South Sea bubble, famously complained that he could "calculate the motions of heavenly bodies, but not the madness of people." Despite this genius admitting defeat, the potentially lucrative venture of predicting (stock) market behaviour has attracted many researchers, but so far to no avail. Tempting as this approach may be, we have chosen to take a different approach because we believe a view of market behaviour as a complex social system may yield valuable new insights.

Taking the Efficient Market hypothesis, which posits that all traders are omniscient and perfectly rational in their trading decisions, we have developed a model with the intention of reproducing the type of fluctuations observed in the stock market while maintaining a realistic scenario. The main factor that delays stability in our model is social influence: a network of trust among the traders. Interestingly, a randomly generated trust network could not reproduce this delay in stability, and we are currently looking at what is so special about the trust network that causes the delay in stability.