The Strange Symphony of the Stock Traders - ScienceNOW: Sociologist Brian Uzzi of Northwestern University in Evanston, Illinois, and colleagues analyzed all trades taking place in a single firm of 66 employees over 2 years. As is usual in trading firms, the employees specialized in different markets—housing, autos, or health care, for example—so they had no obvious incentive to copy one another's behavior. Each trader typically bought or sold stocks about 80 times a day, which the researchers allotted to second-long time windows.
A 7-hour working day is roughly 25,000 seconds, so the chance of one employee's 80 trades randomly synchronizing with any of his colleague's is small. Yet Uzzi's group found that up to 60% of all employees were trading in sync at any one second. What's more, the individual employees tended to make more money during these harmonious bursts, the team reports online this week in the Proceedings of the National Academy of Sciences.