Watching Foreigners: How counterparties enable crowds and generate liquidity in financial markets

Open to the Public
Nador u. 9, Faculty Tower
Thursday, October 18, 2012 - 5:30pm
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Thursday, October 18, 2012 - 5:30pm to 7:00pm


cordially invites you for an interactive lecture on


Watching Foreigners: How counterparties enable crowds and generate liquidity in financial markets


delivered by
Aaron Pitluck
Political Economy Research Group Fellow, CEU, and Associate Professor of Sociology, Illinois State University.

Thursday, October 18, 2012.  5:30-7:00 pm.  CEU, Faculty Tower 909.

A common argument made in the social sciences and mass media is that professional investors herd—that is, they replicate the trades of earlier traders.  This is said to be particularly likely when portfolio managers invest in the global south.  Scholarship on global capital flows, debates on financial liberalization, and political economic analyses of foreign capital often make reference to foreigners’ tendency to herd in emerging markets.

This talk provides a new way of looking at this old problem of herding in the global south.  I advocate a liquidity perspective that problematizes the capacity for a herd to form because of the absence of sufficient counterparties willing to trade.  Drawing on ethnographic interviews with local professional investors in Malaysia—a substantively and theoretically important stock market—the findings are non-intuitive relative to the common-sense explanations of the information asymmetry and identity-based herding literatures.  I find that although locals watch their foreign competitors closely, these small, local financial firms find few reasons to imitate these powerful international actors.  Indeed, locals enable crowds of foreigners because they are willing to be counterparties even when they perceive the foreigner’s trade as savvy, highly skilled, or informed.  The conclusion and discussion explores implications of this argument for social theory and social policy.

About the lecturer:  Aaron Pitluck is the Political Economy Research Group Postdoctoral Fellow (2011-2013) at Central European University and is an Associate Professor of Sociology at Illinois State University.  His research centers on issues of finance and society.  His principal research project is an investigation of the Islamic finance industry as a case study for understanding large-scale institutional change in global financial markets, as well as to analyze some of the possibilities and limitations of counter-hegemonic reform projects in finance.

About PERG:  PERG is a joint student-faculty research group which brings together members from several CEU departments. It aims at fostering collaborative research among the CEU faculty and students across different departments working in the field of political economy, concentrating primarily, but not exclusively, on the area of Central and Eastern Europe. For more, visit:

Political Economy Research Group
Central European University
Nador u. 9
H-1051 Budapest