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David Stark Columbia University

Peripheral Vision in Financial Markets. David Stark Columbia University. Moscow 28 October 2012. My research collaborators: Daniel Beunza London School of Economics Supported by the National Science Foundation and a fellowship from The Netherlands Institute for Advanced Study.

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David Stark Columbia University

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  1. Peripheral Vision in Financial Markets David StarkColumbia University Moscow 28 October 2012

  2. My research collaborators: Daniel BeunzaLondon School of Economics Supported by the National Science Foundation and a fellowship from The Netherlands Institute for Advanced Study. Matteo PratoUniversity of Lugano

  3. The origins of the new economic sociology Parsons’ Pact

  4. The origins of the new economic sociology Parsons’ Pact You, the economists, get value; we, the sociologists, get values. You study the economy; we will study the social relations in which economies are embedded.

  5. Two dominant schools in economic sociology: Economies are embeddedin cultural values (and cognitive frames). Economies are embedded in social relations. In both approaches, calculative practices are left unexamined.

  6. STS enters Economic Sociology Michel Callon (France) Donald MacKenzie (Great Britain) Karin Knorr-Cetina (Germany) And their students Fabian Muniesa Vincent Lepinay Yuval Milo Alex Preda

  7. Network analysis in economic sociology views economies as embedded in social relations. In our view: Calculation is not embedded in social relations. Calculation is itself social. Calculation is socio-technically distributed. What counts? Bring tools into accounts about what counts.

  8. A declarative This is a pipe organ in largest hall of Moscow House of Music. Posted by Irina at 20:55 Labels: instuments, theatre

  9. “I apologize.” A performative

  10. Performativity (following MacKenzie): Financial models are not representations. They are interventions that format, shape, perform markets. Their use brings new economic objects (markets) into being.

  11. “This is the way that people get from point A to point B.”

  12. Performativity (in my defintion): A model is performative when its use increases its predictive capabilities.

  13. From Perfomativity to Reflexivity

  14. Institutionalism in economic sociology focuses on routines, scripts, taken-for-granteds, and “unreflective action.” In my view: the performativity view ignores skilled performance. Why should we deny to actors the reflexivity that we prize and praise in our own profession?

  15. Key, in thinking about distributed cognition and distributed reflexivity: A new form of sociality disembedded yet entangled; anonymous yet collective; screen-mediated yet differentiated; impersonal yet emphatically social.

  16. Research with Daniel Beunza

  17. How do traders deal with the fallibility of their models?

  18. This is a pipe organ.

  19. The arbitrage traders we studied do the same.

  20. The trading room is populated with devices for doubt.Traders do not simply use models and devices that perform the market. They also create and use devices for reflexivity. This reflexivity is not exterior to (or above) the structures of socially distributed calculation but is an integral part of it.

  21. Arbitrage is a (reflexively) skilled performance. And this reflexivity is not of the individualbut is social and material.

  22. Cognitive challenges of using models in arbitrage

  23. Calculation in merger arbitrage involves • the dissonance between two sets of probability estimates: • probability estimates derived at the desk using proprietary models, databases, and instrumentation. • 2) “implied probablity” – the aggregate probability estimates of the trader’s rivals

  24. a given trading desk makes probability estimates based on models, proprietary databases, and instrumentation

  25. V= (1-)PNS +PS

  26. The trader’s models and instrumentation are powerful scopes for viewing the markets.

  27. But scopes that reveal can also conceal. If you take your model for granted, you can lose your shirt.

  28. To avoid cognitive lock-in, the traders turn to socio-technical networks outside the trading room.

  29. relation between the trader and his rivals

  30. Seeing the screens of one’s rivals is not possible.

  31. The spread plot

  32. The spread plot is a representation of an economic object that does not have a price and is otherwise not observable, co-produced by the positioning of actors who use it to confront their interpretations and re-evaluate their positions.

  33. $ Acquirer Target time Decoding the spread plot “Backing out” implied probability

  34. The spread plot instantiates the diversity of dispersed anonymous actors.

  35. dissonance

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