Wisdom Of Crowds - EffectR e s e a r c h A n d I m p l i c a t i o n s F o r S o c i a l T r a d i n g C o m m u n i t i e s

#tradesocial @swipestox

1.72 hours per day on social media

28% + of internet usage is social

8% + growth per year

Social Media – A Base For Wisdom Of Crowds

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“Diversity and independence are important because the best collective decisions are the product of disagreement and contest, not consensus or compromise.”

- James Surowiecki, 2004 -

Wisdom of Crowds – The Quintessence

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Decentrality

Diversity

Independence

Aggregation

Four Axioms Of A Wise Crowd

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No homo oeconomicus, but homo psychologicus

Condorcet Jury Theorem is relevant

Experts can tend to conformity

Decision Independence

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Diverse opinions lead to a wiser crowd

Diversity Prediction Theorem is relevant

Diverse trading could lead to 30% better performance

Diversity Is Key

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Local & specific knowledge from education, motivation etc.

Implicit, subconscious knowledge

Expert crowd might be better

Decentrality – Knowledge Wins

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Aggregation – Compiling The Data

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Aggregation feasible if previous axioms are respected

Aggregation can be constantly refined

Machine Learning might be useful7www.swipestox.com

The Madness of Crowd – Bad Investments

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Wrong decisions can be made Fatal in social trading

Herd behaviour can lead to a mad crowd

Compare your strategy to the 4 axioms 8www.swipestox.com

Endogenous Wisdom Of Crowd - Effect

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One person can slightly increase performance with various opinions

Rethink investment opportunities Try different points of view

Variety is compromised due to subconscious bias9www.swipestox.com

Examples Of Success With Wisdom Of Crowds

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Predictions of indices (Dax, S&P 500 & Dow Jones) using social media

Box-office success of movies that are not even announced but likely

Election results and seat distribution 10www.swipestox.com

Future Research Opportunities

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Prediction models & aggregation of wisdom of crowds

Long-term study of potential benefits of social trading

Usage of algorithms and machine learning11www.swipestox.com

Mobile Social Trading

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Complete flexibility

Connect to the social trading community

Simply copy trades or create a strategy that others follow12www.swipestox.com

Lessons Derived For Social Trading Strategies

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Create as many diverse strategies as possible

Evaluate decisions from various points of view

Aggregate various opinions from the social trading community13www.swipestox.com

Enjoy Your Profits And Be Social

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Become a social trader that others follow

Take some time for yourself and enjoy your profits

Be altruistic and use your profits to make the world a better place14www.swipestox.com