Tuesday’s earthquake that shook the east coast of the United States did more than scare the bejeezus out of people unaccustomed to the earth moving beneath their feet. It provided what I think is a good example of synchrony, a phenomenon widespread in the natural world where individuals act in concert with one another without any explicit command to do so.
The story starts at 1:51 PM when a magnitude 5.8 earthquake struck about 5 miles (8.5 km) south of Mineral, Virginia. That’s a large quake even by the standards of the west coast and nearly unheard of on the east coast. The old, solid rock that underlies large portions of the eastern U.S. relayed the shaking as far away as Illinois and Georgia. So far, little damage has been reported, but there was another cause for concern. Sitting just 7 miles (11.2 km) northeast of Mineral, Virginia, is the North Anna Power Station with its two nuclear reactors.
The plants are owned by Dominion Resources. Traders must have feared another Fukishima was on their hands, because the company’s stock price started to drop precipitously at 1:52 PM, just one minute after the earthquake. The price slid for 23 minutes, losing $1.32 before beginning its recovery. By market close, the stock nearly recovered its losses, but that’s not the real story. The rapidity of the move and the spike in volume—up to 163,000 shares versus the day’s previous high of 64,000—tells me that synchrony was afoot. Knowledge that Dominion’s North Anna Power Station was close to the quake’s epicenter likely spread like wildfire throughout traders’ social networks via instant messages and tweets, leading to the massive selloff. (The nuclear plant lost offsite power and is running on diesel generators as of this writing. No major damage is suspected.)
Brian Uzzi, a professor of management and organizations, Kathleen Hagerty, a professor of finance, and Serguei Saavedra, an associate research professor at Northwestern, detail in their research the uncanny ability of stock traders to synchronize trades based on such a piece of information. No conscious coordination is involved—though traders chat with each other virtually, they do not divulge precisely when they are going to sell. Rather, traders digest messages and tweets from their social network and decide on their own when to move. Trading of Dominion shares mere minutes after the earthquake strikes me as a cool example of what Uzzi, Hagerty, and Saavedra saw in their research. Head over to the Kellogg Insight article to read more.