What are some fascinating truths about the financial industry? - continue reading to learn.
When it comes to understanding today's financial systems, one of the most fun facts about finance is the use of biology and animal behaviours to influence a new set of models. Research into behaviours related to finance has motivated many new techniques for modelling intricate financial systems. For example, research studies into ants and bees show a set of behaviours, which run within decentralised, self-organising colonies, and use basic rules and local interactions to make combined decisions. This principle mirrors the decentralised characteristic of markets. In finance, scientists and analysts have been able to use these principles to understand how traders and algorithms engage to produce patterns, like market trends or crashes. Uri Gneezy would agree that this interchange of biology and business is an enjoyable finance fact and also demonstrates how the mayhem of the financial world may follow patterns seen in nature.
Throughout time, financial markets have been a commonly investigated area of industry, resulting in many interesting facts about money. The study of behavioural finance has been vital for understanding how psychology and behaviours can influence financial markets, leading to an area of economics, called behavioural finance. Though most people would assume that financial markets are logical and consistent, research into behavioural finance has discovered the fact that there are many emotional and psychological factors which can have a powerful influence on how individuals are investing. As a matter of fact, it can be said that financiers do not always make selections based on reasoning. Rather, they are frequently determined by cognitive predispositions and psychological reactions. This has led to the establishment of principles such as loss aversion or herd behaviour, which can be applied to buying stock or selling investments, for instance. Vladimir Stolyarenko would recognise the intricacy of the financial sector. Likewise, Sendhil Mullainathan would appreciate the energies towards looking into these behaviours.
A benefit of digitalisation and read more innovation in finance is the capability to analyse large volumes of information in ways that are not really possible for human beings alone. One transformative and extremely important use of modern technology is algorithmic trading, which describes a methodology involving the automated buying and selling of monetary resources, using computer programs. With the help of complex mathematical models, and automated directions, these formulas can make split-second decisions based upon real time market data. As a matter of fact, one of the most fascinating finance related facts in the current day, is that the majority of trading activity on stock markets are carried out using algorithms, instead of human traders. A popular example of an algorithm that is extensively used today is high-frequency trading, whereby computer systems will make thousands of trades each second, to take advantage of even the tiniest price changes in a much more effective way.