Structural balance emerges and explains performance in risky decision-making

Polarization affects many forms of social organization. A key issue focuses on which affective relationships are prone to change and how their change relates to performance. In this study, we analyze a financial institutional over a two-year period that employed 66 day traders, focusing on links between changes in affective relations and trading performance. Traders’ affective relations were inferred from their IMs (>2 million messages) and trading performance was measured from profit and loss statements (>1 million trades). Here, we find that triads of relationships, the building blocks of larger social structures, have a propensity towards affective balance, but one unbalanced configuration resists change. Further, balance is positively related to performance. Traders with balanced networks have the “hot hand”, showing streaks of high performance. Research implications focus on how changes in polarization relate to performance and polarized states can depolarize.
How do socially polarized systems change and how does a change in polarization relate to performance? Using instant messaging data and performance records from day traders, the authors find that certain relations are prone to balance and that balance is associated with better trading decisions.