Constructing the Market Frame

Distributed Cognition and Distributed Framing in Financial Markets

Bibliographic Data

ID7430585
AuthorsIain Hardie (0000-0002-4694-3755, University of Edinburgh), Donald Mackenzie (0000-0002-1860-8116, University of Edinburgh)
Year2007
Volume12
Issue3
Pages389-403
Publication date2007-09-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueNew Political Economy (JOURNAL)
Journal identifiersISSN: 1356-3467 • E-ISSN: 1469-9923
PublisherTaylor & Francis (PUBLISHER • GB)
DOI10.1080/13563460701485649
OpenAlexW2030363339
LanguageEN
Citations received9

Click to increase image sizeClick to decrease image size Notes 1. Stephen Schurr, '2006 global hedge fund top $1,500 bn', Financial Times, 27 March 2006, p. 23. 2. Patrick Jenkins & Richard Milne, 'Hedge funds hold a quarter of Germany's blue-chips', Financial Times, 2 September 2005, p. 17. 3. Anon, 'Case for a closer look at hedge funds', Financial Times, 12 May 2005, p. 18. 4. Anon, 'The vision thing [Lex Column]', Financial Times, 20 April 2005, p. 18. 5. See Iain Hardie & Donald MacKenzie, 'Assembling an Economic Actor: The Agencement of a Hedge Fund', Sociological Review, Vol. 55, No. 1 (2007), pp. 57–80. 6. Edwin Hutchins, Cognition in the Wild (MIT Press, 1995); Edwin Hutchins, 'How a Cockpit Remembers Its Speeds', Cognitive Science, Vol. 19, No. 3 (1995), pp. 265–88. 7. Hutchins, 'How a Cockpit Remembers Its Speeds', p. 265. 8. Erving Goffman, Frame Analysis: An Essay on the Organisation of Experience (Harper & Row, 1974); Daniel Beunza & Raghu Garud, Securities Analysts as Frame-Makers, Working Paper 733, UPF Department of Economics and Business, 2005, http://www.econ.upf.es/docs/papers/downloads/733.pdf (accessed 30 October 2006). 9. Beunza & Garud, Securities Analysts as Frame-Makers. 10. In many markets, the key intermediaries are inter-dealer brokers who typically keep a dedicated telephone line open permanently to each of the dealers with whom they do business, so that communication is not slowed by the delays of ordinary telephony. A 'voice box' is the microphone and loudspeaker equipment at each end of this dedicated line. 11. Sylvia Maxfield, Gatekeepers of Growth (Princeton University Press, 1997); Benjamin Cohen, The Geography of Money (Cornell University Press, 1998); Layna Mosley, Global Capital and National Governments (Cambridge University Press, 2003). 12. Herbert Simon, 'A Behavioral Model of Rational Choice', Quarterly Journal of Economics, Vol. 69, No. 1 (1955), pp. 99–118; Mitchel Y. Abolafia, Making Markets: Opportunism and Restraint on Wall Street (Harvard University Press, 1996); Daniel Beunza & David Stark, 'Tools of the Trade: The Socio-technology of Arbitrage in a Wall Street Trading Room', Industrial and Corporate Change, Vol. 13, No. 2 (2004), pp. 369–400. 13. Hardie & MacKenzie, 'Assembling an Economic Actor'. 14. Ibid. for examples. 15. See, for example, Saskia Scholtes, 'Hedge funds to use high-tech filter to harvest market gossip', Financial Times, 21 September 2006, p. 1. 16. We set out here a somewhat idealised example of market structure we observed and as described by interviewees. In the hedge fund observation, the trader was himself a former investment banker trader and he communicated directly with former colleagues who were themselves still investment bank traders. 17. Interview with salesperson, 12 May 2006. 18. We do not focus here on, but nevertheless recognise, the role of the equipment involved in framing the information. 19. Indeed, the actions of the US authorities against a number of analysts and investment banks in the aftermath of the dotcom bubble are intended to remove any influence on research analysts by their colleagues. 20. Interview with salesperson, 12 May 2006. 21. Ibid. 22. Ibid. 23. Interview, 17 October 2005. 24. Foreign currency debt issued by the Turkish government. 25. Sales credits are notional amounts of money credited to a salesperson for a trade. The more profitable a trade for the investment bank, the higher the sales credit should be. They, or something very similar, are usually part of the way to measure the value of a salesperson's turnover. 26. Turkish lira denominated debt issued by the Turkish government. 27. Investment bank trader interviewed 22 June 2005. Note also the implied competition between, and therefore differing interests of, the various traders here, as they compete for a salesperson's attention. 28. Interview with salesperson, 12 May 2006. 29. See, for example, Maxfield, Gatekeepers of Growth; Cohen, The Geography of Money; Mosley, Global Capital and National Governments. 30. Mosley, Global Capital and National Governments. 31. For a very different approach that sees investment banks as possible 'carriers' of contagion, see Guillermo A. Calvo, Contagion in Emerging Markets: When Wall Street is a Carrier, Research Paper, 2 May 1999, http://www.bsos.umd.edu/econ/ciecrp8.pdf (accessed 20 November 2006). 32. For discussions on the relative influence of endogenous and exogenous factors on emerging market bond spreads, see, for example, Stefano Manzocchi, 'Capital Flows to Developing Economies throughout the Twentieth Century', in Leslie Elliott Armijo (ed.), Financial Globalization and Democracy in Emerging Markets (Palgrave, 2001), pp. 51–73; Syvlia Maxfield, 'Understanding the Political Implications of Financial Internationalization in Emerging Market Countries', World Development, Vol. 26, No. 7 (1998), pp. 1201–19; G. A. Calvo, L. Liederman & C. M. Reinhart, 'Inflows of Capital to Developing Countries in the 1990s', Journal of Economic Perspectives, Vol. 10, No. 2 (1996), pp. 123–39; Barry Eichengreen & Ashoka Mody, 'What Explains Changing Spreads on Emerging Market Debt?', in Sebastian Edwards (ed.), Capital Flows and the Emerging Economies (Chicago University Press, 2000), pp. 107–34; Eduardo Fernández-Arias & Roberto Rigobobón, 'Financial Contagion in Emerging Markets', in Eduardo Fernández-Arias & Ricardo Hausmann (eds.), Wanted. World Financial Stability (Inter-American Development Bank, 2000), pp. 33–47. 33. Michel Callon, 'Why Virtualism Paves the Way to Political Impotence: A Reply to Daniel Miller's Critique of The Laws of the Markets', Economic Sociology: European Electronic Newsletter, Vol. 6, No. 2 (2005), p. 7; Michel Callon & Fabian Muniesa, 'Economic Markets as Calculative Collective Devices', Organization Studies, Vol. 26, No. 8 (2005), pp. 1233–4. Another example of a politically salient aspect of the process of singularisation is the decision as to the legal jurisdiction under which a bond would be documented. The choice of a jurisdiction other than that of the borrowing country is the most obviously important, but the choice, for example, between New York and English law also has implications for the ease with which an issuer can change bond documentation. International Monetary Fund, Collective Action Clauses in Sovereign Bond Contracts – Encouraging Greater Use, 6 June 2002, p. 2, http://www.imf.org/external/np/psi/2002/eng/060602a.pdf, accessed 11 October 2006. 34. Beunza & Stark, 'Tools of the Trade', p. 2. 35. Iain Hardie, 'The Sociology of Arbitrage: A Comment on Mackenzie', Economy and Society, Vol. 33, No. 2 (2004), pp. 239–54. 36. Callon & Muniesa, 'Economic Markets as Calculative Devices', p. 1235. 37. Donald MacKenzie, 'Long-Term Capital Management and the Sociology of Arbitrage', Economy and Society, Vol. 32, No. 2 (2003), p. 364. 38. Iain Hardie & Layna Mosley, 'Turkey's Convergence Tale: Market Pressures, Membership Conditionality, and EU Accession', mimeo, 2006. 39. Beunza & Garud, Securities Analysts as Frame-Makers. 40. Mosley, Global Capital and National Governments. 41. Only 58 per cent of Mosley's interviewees mentioned elections in such countries as a factor they took into account, and of those who mentioned them almost nine tenths said they were not an important factor. Ibid., Table 3.1, p. 56. 42. Ibid., p. 129. 43. Callon & Muniesa, 'Economic Markets as Calculative Devices'. 44. Beunza & Garud, Securities Analysts as Frame-Makers. 45. See Ibid., pp. 8–10 for both summary and critique. 46. Ibid., p. 33 47. Bruno Latour, Science in Action: How to Follow Scientists and Engineers Through Society (Harvard University Press, 1987). 48. Beunza & Garud, Securities Analysts as Frame-Makers, p. 33. 49. This is not to disagree with Beunza and Garud's assertion that 'analysis is more than forecasting'. They demonstrate this, but it is certainly true that the performance of the Amazon share price signalled which analyst's frame prevailed. 50. Callon & Muniesa, 'Economic Markets as Calculative Devices', p. 1233. 51. In Beunza and Garud's example, the framing controversy between Blodget's view of Amazon as an internet company and Cohen's of Amazon as a book retailer was resolved (with Blodget getting Cohen's job) not because one view was proved by events to be more credible, but because the stock price performance appeared to validate Blodget's frame. 52. By market power, we mean not simply 'calculative power' (Callon & Muniesa, 'Economic Markets as Calculative Devices') in a narrow sense, as many market actors can be seen as having similar calculative power under a narrow definition, but more the ability, which would be suggested by a broad definition of calculative power, to move market prices as a result of their investment decisions

Framing (construction · Language and cultural evolution

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