Wisdom of the institutional crowd

Kevin Primicerio (1) , Damien Challet (1) , Stanislao Gualdi (2)

1 MICS - Mathématiques et Informatique pour la Complexité et les Systèmes
2 CFM - Capital Fund Management

The average portfolio structure of institutional investors is shown to have properties which account for transaction costs in an optimal way. This implies that financial institutions unknowingly display collective rationality, or Wisdom of the Crowd. Individual deviations from the rational benchmark are ample, which illustrates that system-wide rationality does not need nearly rational individuals. Finally we discuss the importance of accounting for constraints when assessing the presence of Wisdom of the Crowd.

Domaines: Économie et finance quantitative [q-fin]

Kevin Primicerio, Damien Challet, Stanislao Gualdi. Wisdom of the institutional crowd. 2017. ⟨hal-01484914⟩