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Risk Beliefs Narratives and Market Structure

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SFI ACtioN Annual Risk Meeting


October 8, 2020
UBS
New York, NY


This meeting seeks to examine market risk through the lens of belief dynamics, changing narratives, and market structure. Narratives and belief dynamics impact market structure, market behavior, and by extension market risk. For example, belief convergence drives crowding, contagion, and the growing prevalence of passive management. Belief instability drives market volatility. Over the last several years, advances in complexity science have illuminated several key mechanisms underlying belief dynamics and narrative selection. These include:

  1. Complex contagion over networks, through which beliefs propagate over social networks.
  2. Behavioral spillovers, through which the strategies used in one game are imported (often unconsciously) to future games.
  3. Collective Intelligence, through which belief diversity effects system-level or market-level computation.

This meeting will bring academics studying the above phenomena together with finance practitioners whose expertise include investment crowding and market volatility.