Journal article

Turnover, account value and diversification of real traders: evidence of collective portfolio optimizing behavior

  • Lachapelle, David Morton de Department of Quantitative Asset Management, Swissquote Bank SA, Gland, Switzerland - Institute of Theoretical Physics, Ecole Polytechnique Fédérale de Lausanne, Switzerland
  • Challet, Damien Physics Department, University of Fribourg, Switzerland
Published in:
  • New Journal of Physics. - 2010, vol. 12, no. 7, p. 075039
English Despite the availability of very detailed data on financial markets, agent-based modeling is hindered by the lack of information about real trader behavior. This makes it impossible to validate agent-based models, which are thus reverse-engineering attempts. This work is a contribution towards building a set of stylized facts about the traders themselves. Using the client database of Swissquote Bank SA, the largest online Swiss broker, we find empirical relationships between turnover, account values and the number of assets in which a trader is invested. A theory based on simple mean-variance portfolio optimization that crucially includes variable transaction costs is able to reproduce faithfully the observed behaviors. We finally argue that our results bring to light the collective ability of a population to construct a mean-variance portfolio that takes into account the structure of transaction costs.
Faculté des sciences et de médecine
Département de Physique
  • English
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