samedi 23 mars 2013

Where do investors come from?

The Hamburg University recently hosted a two day workshop about the sociology of financial markets, organized jointly by two sections of the German Society for Sociology (Deutsche Gesellschaft für Soziologie), the section for economic sociology and the section for organizations sociology. There, I was lucky enough to present an ethnographic paper called "Financial Investment and Social Division of Labor. Conditions of Realization of a Financial Institution". In this paper, I show how the figure of the investor as a speculator managing a "balanced whole" comes about.

Not only markets or traded goods are socially constructed. Not only relationships between economic agents are embedded into broader social structures and institutions. So are also market participants themselves. Therefore, a full understanding of the social order of financial markets must include a description of the kinds of actors that participate in them. At a time where "institutional investors" trade a large part of the volumes exchanged on markets, my communication aimed at fulfilling such a task by analyzing the figure of the investor.

Mainstream financial theory derives from the neoclassical economic theory and it elaborates on a general theory of action where agency is property of the investor. It has already been shown that the figure of the investor as the basic agent of financial systems is a social institution (Preda 2005), and that it is linked to legal relationships (Montagne 2006; Ortiz 2011). I explore further aspects of the institutionalization of the investor as the central agent of financial markets.

As a social institution, the figure of the investor pervades material and symbolic structures. In the words of Durkheim and of his school, an institution becomes part of the morphology of a society and of its system of representations. Institutions crystallize into objects with which agents interact. On the one hand, agents manipulate these objects. On the other hand, objects are part of the social structure and, as such, they guide or constrain action. Sociologists can observe these objects and take them for the empirical expression of a social fact. In particular, the figure of the investor rests on a specific symbolic form (Cassirer 2010; Panovsky 1991; Bourdieu 1977), that of the financial assets "portfolio", which the investor manages.

According to Markowitz (1959), "a good portfolio is more than a long list of good stocks and bonds. It is a balanced whole, providing the investor with protections and opportunities with respect to a wide range of contingencies". And indeed, I show that such a representation of the portfolio fits perfectly with the actual portfolios with which asset managers deal in their everyday work practices. I also show what it takes to make such a representation become reality. To put it bluntly, the I highlight the social conditions that are necessary for a portfolio to really be "a balanced whole" and not just "a long list of assets".

Mainly, the figure of the investor as the manager of a portfolio rests on a specific form of social division of labour that one can analyze on two levels. First, there is a set of market devices and information technologies that are related to a broad division of labour among individual and collective actors that participate in the markets. Second, there is an intra-organizational division of labour among investment firms, where socially differentiated individuals collaborate with each other. Indeed, in asset management firms, teams such as front, middle and back-offices, coordinate around the portfolio, in a very concrete way. The division of labour and the coordination of actors around the portfolio make it possible for the investor to become part of the reality, which means to become a social fact, and not only a representation.

Elaborating on the definition of speculation formulated by Kaldor (1939), I further argue that the social division of labour aims at creating investors that are pure speculators, concentrating only on price fluctuations. Abstracting all other dimensions of traded goods or assets but for their price is a difficult task and it necessitates the complex division of labour that has just been mentioned.

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