Inference of implicit trader interaction networks

by Damien Challet (Chair of Quantitative Finance, Laboratoire de Mathématiques Appliquées aux Systèmes, École Centrale de Paris)

Monday 13 Apr 2015, 16:00 → 17:00 Europe/Rome

Aula Conversi (Dip. di Fisica - Edificio G. Marconi)

Most agent-based models of financial markets implicitly assume that the agents interact through asset prices and exchanged volumes. Some of them add an explicit trader-trader interaction network on which rumors propagate or that encode groups that take common decisions. Contrarily to other types of data, such networks, if they exist, are necessarily implicit, which makes their determination a more challenging task. This contribution analyzes transaction data of all the clients of two brokers, encomp! assing several years of trading. By assuming that the links between agents are determined by systematic simultaneous activity or inactivity, we show that interaction networks do exist and are remarkably stable over time. In addition, we find that the (in)activity of some agents systematically triggers the (in)activity of other traders, defining lead-lag relationships between the agents. This implies that the global investment flux is predictable, which we check by using sophisticated machine learning methods.