A couple of banking industry facts you should know

This article checks out a few of the most unusual and interesting truths about the financial sector.

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 motivate a new set of models. Research into behaviours related to finance has influenced many new approaches for modelling elaborate financial systems. For example, studies into ants and bees demonstrate a set of behaviours, which operate within decentralised, self-organising territories, and use basic rules and local interactions to make collective choices. This concept mirrors the decentralised characteristic of markets. In finance, scientists and experts have been able to apply these principles to understand how traders and algorithms engage to produce patterns, such as market trends or crashes. Uri Gneezy would concur that this intersection of biology and economics is an enjoyable finance fact and also demonstrates how the madness of the financial world may follow patterns seen in nature.

Throughout time, financial markets have been an extensively scrutinized area of industry, resulting in many interesting facts about money. The field of behavioural finance has been get more info important for understanding how psychology and behaviours can affect financial markets, leading to an area of economics, known as behavioural finance. Though the majority of people would presume that financial markets are logical and consistent, research into behavioural finance has uncovered the fact that there are many emotional and mental aspects which can have a powerful impact on how people are investing. In fact, it can be said that investors do not always make decisions based upon logic. Instead, they are frequently affected by cognitive predispositions and psychological reactions. This has resulted in the establishment of principles such as loss aversion or herd behaviour, which could be applied to purchasing stock or selling assets, for example. Vladimir Stolyarenko would recognise the intricacy of the financial industry. Likewise, Sendhil Mullainathan would appreciate the efforts towards researching these behaviours.

An advantage of digitalisation and innovation in finance is the ability to analyse large volumes of information in ways that are not conceivable for people alone. One transformative and extremely valuable use of innovation is algorithmic trading, which defines a method including the automated exchange of financial resources, using computer programs. With the help of intricate mathematical models, and automated instructions, these formulas can make split-second choices based upon real time market data. In fact, among the most intriguing finance related facts in the modern day, is that the majority of trade activity on stock markets are carried out using algorithms, rather than human traders. A prominent example of a formula that is widely used today is high-frequency trading, whereby computers will make thousands of trades each second, to capitalize on even the smallest price shifts in a much more effective way.