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Social machines: how recent technological advances have aided financialisation

Social machines: how recent technological advances have aided financialisation
Social machines: how recent technological advances have aided financialisation
In recent years, financial markets have been fundamentally transformed by innovations in information technology, in particular with regard to the web, social networks, high-speed computer networks and mobile technologies. We borrow the concept of Social Machines from Web Science as a single concept that captures the essence of all these recent technological changes to argue that the emergence of these Social Machines has aided the transformation of financial markets and society. This study explores the formation of these Social Machines with three sample disruptive technologies – automated/high-frequency trading, social network analytics and smart mobile technology. Through critical reflective analysis of these three case studies, we assess the impact of information technology innovation on financialisation. We adopt three case studies – automated trading; market information extraction using social media technologies; and information diffusion and trader decision-making with mobile technology on financial and real sector changes – which demonstrate the increasing trend of transaction velocity, speculative trading, increased complex information network, accelerated inequality and leverage. Our findings demonstrate that technologically enabled financial Social Machines harness crowd wisdom, engage disparate individual traders to produce more accurate price estimations, and have enhanced decision-making capability. However, these same changes can also have a simultaneously detrimental effect on financial and real sectors, in some situations exacerbating underlying distortions, such as misinformation due to complex information networks, speculative trading behaviour, and higher volatility with transaction velocity. Overall, we conclude that these innovations have transformed the fundamental nature of key aspects of the finance industry and society as a whole.
0268-3962
234–250
Ma, Tiejun
1f591849-f17c-4209-9f42-e6587b499bae
Mcgroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Ma, Tiejun
1f591849-f17c-4209-9f42-e6587b499bae
Mcgroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072

Ma, Tiejun and Mcgroarty, Frank (2017) Social machines: how recent technological advances have aided financialisation. Journal of Information Technology, 32 (3), 234–250. (doi:10.1057/s41265-017-0037-7).

Record type: Article

Abstract

In recent years, financial markets have been fundamentally transformed by innovations in information technology, in particular with regard to the web, social networks, high-speed computer networks and mobile technologies. We borrow the concept of Social Machines from Web Science as a single concept that captures the essence of all these recent technological changes to argue that the emergence of these Social Machines has aided the transformation of financial markets and society. This study explores the formation of these Social Machines with three sample disruptive technologies – automated/high-frequency trading, social network analytics and smart mobile technology. Through critical reflective analysis of these three case studies, we assess the impact of information technology innovation on financialisation. We adopt three case studies – automated trading; market information extraction using social media technologies; and information diffusion and trader decision-making with mobile technology on financial and real sector changes – which demonstrate the increasing trend of transaction velocity, speculative trading, increased complex information network, accelerated inequality and leverage. Our findings demonstrate that technologically enabled financial Social Machines harness crowd wisdom, engage disparate individual traders to produce more accurate price estimations, and have enhanced decision-making capability. However, these same changes can also have a simultaneously detrimental effect on financial and real sectors, in some situations exacerbating underlying distortions, such as misinformation due to complex information networks, speculative trading behaviour, and higher volatility with transaction velocity. Overall, we conclude that these innovations have transformed the fundamental nature of key aspects of the finance industry and society as a whole.

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Accepted/In Press date: 13 January 2017
e-pub ahead of print date: 6 March 2017
Published date: September 2017
Organisations: Southampton Business School

Identifiers

Local EPrints ID: 405302
URI: http://eprints.soton.ac.uk/id/eprint/405302
ISSN: 0268-3962
PURE UUID: 3f0e57d4-a371-485d-84f5-0cc31f2c7ef5
ORCID for Frank Mcgroarty: ORCID iD orcid.org/0000-0003-2962-0927

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Date deposited: 02 Feb 2017 16:13
Last modified: 16 Mar 2024 03:33

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Contributors

Author: Tiejun Ma
Author: Frank Mcgroarty ORCID iD

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