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

Despite the availability of very detailed data on financial market, 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 to the building of a set of stylized facts about the traders themselves. Using the client database of Swissquote Bank SA, the largest on-line 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 into light the collective ability of a population to construct a mean-variance portfolio that takes into account the structure of transaction costsComment: 26 pages, 9 figures, Fig. 8 fixe

Competition and fragmentation: a simple model generating lognormal-like distributions

The current distribution of language size in terms of speaker population is generally described using a lognormal distribution. Analyzing the original real data we show how the double-Pareto lognormal distribution can give an alternative fit that indicates the existence of a power law tail. A simple Monte Carlo model is constructed based on the processes of competition and fragmentation. The results reproduce the power law tails of the real distribution well and give better results for a poorly connected topology of interactions.Comment: 14 pages, 11 figure