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How to recognize opportunities: Heterarchical search in a Wall Street trading room

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  • Daniel Beunza Ibáñez
  • David Stark

Abstract

Our task in this paper is to analyze the organization of trading in the era of quantitative finance. To do so, we conduct an ethnography of arbitrage, the trading strategy that best exemplifies finance in the wake of the quantitative revolution. In contrast to value and momentum investing, we argue, arbitrage involves an art of association - the construction of equivalence (comparability) of properties across different assets. In place of essential or relationa l characteristics, the peculiar valuation that takes place in arbitrage is based on an operation that makes something the measure of something else - associating securities to each other. The process of recognizing opportunities and the practices of making novel associations are shaped by the specific socio-spatial and socio-technical configurations of the trading room. Calculation is distributed across persons and instruments as the trading room organizes interaction among diverse principles of valuation.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 735.

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Date of creation: Jan 2004
Date of revision: Sep 2005
Handle: RePEc:upf:upfgen:735

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Arbitrage; trading; heterarchy;

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Cited by:
  1. Williams, James W., 2013. "Regulatory technologies, risky subjects, and financial boundaries: Governing ‘fraud’ in the financial markets," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 544-558.
  2. Carlo Massironi & Marco Guicciardi, 2011. "Investment decision making from a constructivist perspective," Qualitative Research in Financial Markets, Emerald Group Publishing, Emerald Group Publishing, vol. 3(3), pages 158-176, October.
  3. Vollmer, Hendrik & Mennicken, Andrea & Preda, Alex, 2009. "Tracking the numbers: Across accounting and finance, organizations and markets," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 619-637, July.
  4. Preda, Alex, 2009. "Brief encounters: Calculation and the interaction order of anonymous electronic markets," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 675-693, July.

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