Skip to main content

Consistent Forecasting vs. Anchoring of Market Stories: Two Cultures of Modeling and Model Use in a Bank

  • Leon Wansleben (a1)

It seems theoretically convenient to construe knowledge practices in financial markets and organizations as “applied economics.” Alternatively or additionally, one might argue that practitioners draw on economic knowledge in order to systematically orient their actions towards profit-maximization; models, then, are understood as devices that make calculative rationality possible. However, empirical studies do not entirely confirm these theoretical positions: Practitioners’ actual calculations are often not “framed” by models; organizations and institutions influence the choice and adoption of models; and different professional groups in financial markets have diverging attitudes towards model calculations. In order to account for this diversity, this article proposes the concept of cultures of economic and financial expertise; the concept focuses on the patterns of knowledge practices and knowledge-related self-definitions of groups within financial organizations and markets; it also facilitates an analysis of the relations between and, more specifically, the hierarchies among different practices and identities. The article then goes on to explore the process of foreign exchange forecasting in a particular bank. The description immediately reveals that two groups are involved in this process: economists and analysts. These groups maintain quite different practices and self-descriptions in relation to models: While the economists in the bank use the models as organizational resources for consistent forecasting procedures and observe data with the help of simple model structures, analysts approach model forecasts from the perspective of critics: They see limits in the variable-centered, as opposed to a “thematic” approach and they disregard a model's imposed temporality. Nevertheless, analysts use model forecasts as anchors for developing their own “paths” and stories about possible future expectation changes in the markets. The specific division of labor between economists and analysts, and specifically the dominant role of analysts in the forecasting process, fit into a larger picture: The rise of institutional investors in the foreign exchange markets and their demand for genuine market knowledge for speculative investment projects has contributed to the rise and dominance of analysts’ culture.

Hide All
Abbott Andrew D. 1992. “What Do Cases Do? Some Notes on Activity in Sociological Analysis.” In What Is a Case? Exploring the Foundations of Social Inquiry, edited by Ragin Charles C. and Becker Howard S., 5382. Cambridge: Cambridge University Press.
Abolafia Mitchell. 1996. Making Markets: Opportunism and Restraint on Wall Street, Cambridge: Harvard University Press.
Barker William. 2007. “The Global Foreign Exchange Market: Growth and Transformation.” Bank of Canada Review Autumn 2007:312.
Beunza Daniel, and Garud Raghu. 2007. “Calculators, Lemmings or Frame-Makers? The Intermediary Role of Securities Analysts.” In Market Devices, edited by Callon Michel, Millo Yuval, and Muniesa Fabian, 1339. Malden MA: Oxford: Blackwell.
Beunza Daniel, and Stark David. 2008. “Tools of the Trade: The Socio-Technology of Arbitrage in a Wall Street Trading Room.” In Living in a Material World: Economic Sociology Meets Science and Technology Studies, edited by Pinch Trevor J. and Swedberg Richard, 253290. Cambridge MA and Oxford: MIT Press.
Beunza Daniel, and Stark David. 2012. “From Dissonance to Resonance: Cognitive Interdependence in Quantitative Finance.” Economy and Society 41 (3):33833417.
BIS. 1995. Triennial Central Bank Survey Foreign Exchange. Basle: Bank for International Settlements,. URL <>, last accessed July 30, 2014.
BIS. 2010. Triennial Central Bank Survey Foreign Exchange. Basle: Bank for International Settlements..URL <>, last accessed July 30, 2014.
Bourdieu Pierre. 1979. La distinction: critique sociale du jugement, Paris: Les éditions de minuit.
Breslau Daniel, and Yonay Yuval. 1999. “Beyond Metaphor: Mathematical Models in Economics as Empirical Research.” Science in Context 12 (2):317332.
Brown Brendan. 1996. Economists and the Financial Markets. London: Routledge.
Bruegger Urs. 1999. “Wie handeln Devisenhändler? Eine ethnographische Studie über Akteure in einem globalen Markt.” Ph.D. thesis, University of St. Gallen.
Bruegger Urs. 2000. “Speculating: Work in Financial Markets.” In Facts and Figures: Economic Representations and Practices, edited by Kalthoff Herbert, Rottenburg Richard, and Wagener Hans-Jürgen, 229255. Marburg: Metropolis Verlag.
Callon Michel. 1998. “Introduction: The Embeddedness of Economic Markets in Economics.” In The Laws of the Markets, edited by Callon Michel, 157. Oxford: Blackwell.
Callon Michel. 2007. “What Does It Mean to Say that Economics Is Performative?” In Do Economists Make Markets? On the Perrformativity of Economics, edited by MacKenzie Donald A., 311357. Princeton: Princeton University Press.
Calmfors Lars, and Wihlborg Clas. 1976. “General Discussion: What Have We Learned? Where Are the Fundamental Conflicts of Opinion?Scandinavian Journal of Economics 78 (2):386412.
CFA. 2008. CFA Program Curriculum. Boston MA: Pearson.
Collins Harry M. 2008. “Actors’ and Analysts’ Categories in the Social Analysis of Science.” In Clashes of Knowledge, edited by Meusburger Peter, Welker Michael, and Wunder Edgar, 101–10. Dordrecht: Springer.
Dornbusch Rudiger. 1976. “Expectations and Exchange Rate Dynamics.” Journal of Political Economy 84 (6):11611176.
Evans Robert. 1999. Macroeconomic Forecasting: A Sociological Appraisal. London: Routledge.
Fourcade Marion. 2006. “The Construction of a Global Profession: The Transnationalization of Economics.” American Journal of Sociology 112 (1):145194.
Frankel Jeffrey A. 1993. On Exchange Rates. Cambridge: MIT Press.
Frankel Jeffrey A., and Rose Andrew K.. 1995. “Empirical Research on Nominal Exchange Rates.” In Handbook of International Economics III, edited by Grossman Gene M., 16891729. Amsterdam: North-Holland.
Frenkel Jacob. 1976. “A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence.” Scandinavian Journal of Economics 78 (2):200224.
Garfinkel Harold. [1967] 2008. Studies in Ethnomethdology. Englewood Cliffs NJ: Prentice-Hall.
Garfinkel Harold, and Sacks Harvey. 1986. “On Formal Structures of Practical Actions.” In Ethnomethodological Studies of Work, edited by Garfinkel Harold, 160–93. London: Routledge & Kegan Paul.
Geertz Clifford. 1973. The Interpretation of Cultures: Selected Essays. New York: Basic Books.
Goffman Erving. 1969. Strategic Interaction, 2nd ed.Philadelphia: University of Pennsylvania Press.
Hägglund Peter. 2000. “The Value of Facts: How Analysts’ Recommendations Focus on Facts instead of Values.” In Facts and Figures: Economic Representations and Practices, edited by Kalthoff Herbert, Rottenburg Richard, and Wagener Hans-Jürgen, 313337. Marburg: Metropolis Verlag.
Kalthoff Herbert. 2005. “Practices of Calculation: Economic Representations and Risk Management.” Theory Culture and Society 22 (2):6997.
Kalthoff Herbert. 2011. “Un/doing Calculation: On Knowledge Practices of Risk Management.” Distinktion: Scandinavian Journal of Social Theory 12 (1):321.
King Michael R., and Rime Dagfinn. 2010. “The $4 Trillion Question: What Explains FX Growth since the 2007 Survey?” In BIS Quarterly Review, December issue, edited by Bank for International Settlements, 27–42. URL <>, last accessed July 3, 2014.
King Michael R., Osler Carol, and Rime Dagfinn. 2011. “Foreign Exchange Market Structure, Players and Evolution.” Working Paper, issue 2011/10, edited by Norges Bank. URL <>, last retrieved July 30, 2014.
Knorr Cetina Karin. 1999. Epistemic Cultures: How the Sciences Make Knowledge. Cambridge: Harvard University Press.
Knorr Cetina Karin. 2003. “From Pipes to Scopes.” Distinktion 7:723.
Knorr Cetina Karin. 2009a. “The Synthetic Situation: Interactionism for a Global World.” Symbolic Interaction Journal of the Society for Study of Symbolic Interaction 32 (1):6188.
Knorr Cetina Karin. 2009. “What Is a Financial Market?” In Wirtschaftssoziologie, edited by Beckert Jens and Deutschmann Christoph, 326–43. Wiesbaden: VS Verlag.
Knorr Cetina Karin. 2011. “Financial Analysis: Epistemic Profile of an Evaluative Science.” In Social Knowledge in the Making, edited by Camic Charles, Gross Neill, and Lamont Michèle, 405–42. Chicago: University of Chicago Press.
Knorr Cetina Karin, and Bruegger Urs. 2002. “Global Microstructures: The Virtual Societies of Financial Markets.” American Journal of Sociology 107 (4):905950.
Knorr Cetina Karin, and Preda Alex. 2007. “The Temporalization of Financial Markets: From Network to Flow.” Theory, Culture & Society 24:116–38.
Langenohl Andreas. 2007. Finanzmarkt und Temporalität: Imaginäre Zeit und die kulturelle Repräsentation der Gesellschaft. Stuttgart: Lucius & Lucius.
Latour Bruno. 2005. Reassembling the Social: An Introduction to Actor-Network-Theory. Oxford: Oxford University Press.
Leigh Star Susan. 2010. “This is Not a Boundary Object: Reflections on the Origin of a Concept.” Science, Technology & Human Values 35 (5):601617.
Leigh Star Susan, and Griesemer James R.. 1989. “Institutional Ecology, ‘Translations’ and Boundary Objects: Amateurs and Professionals in Berkeley's Museum of Vertebrate Zoology, 1907–39.” Social Studies of Science 19 (3):387420.
Lépinay Vincent A. 2011. Codes of Finance: Engineering Derivatives in a Global Bank. Princeton: Princeton University Press.
Lyons Richard K. 2001. The Microstructure Approach to Exchange Rates. Cambridge: MIT Press.
Maas Harro, and Morgan Mary S.. 2012. “Observation and Observing in Economics.” History of Political Economy 44(annual supplement):124.
MacKenzie Donald. 2008. “An Engine, Not a Camera:” How Financial Models Shape Markets. Cambridge: MIT Press.
MacKenzie Donald. 2011a. “The Credit Crisis as a Problem in the Sociology of Knowledge.” American Journal of Sociology 116:17781841.
MacKenzie Donald. 2011b. “Evaluation Cultures? On Invoking ‘Culture’ in the Analysis of Behaviour in Financial Markets.” Unpublished manuscript, University of Edinburgh, URL <>, last accessed July 3, 2014.
MacKenzie Donald A., and Millo Yuval. 2003. “Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange.” American Journal of Sociology 109 (1):107145.
Mars Frank. 1998. “‘Wir alle sind Seher’: Die Praxis der Aktienanalyse.” Ph.D. thesis, University of Bielefeld.
Meese Richard A., and Rogoff Kenneth. 1983. “Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?Journal of International Economics 14 (1–2):324.
Meyer John W. 2010. “World Society, Institutional Theories, and the Actor.” Annual Review of Sociology 36 (1):120.
Mikes Anette. 2009. “Risk Management and Calculative Cultures.” Management Accounting Research 20 (1):1840.
Millo Yuval, and MacKenzie Donald. 2009. “The Usefulness of Inaccurate Models: Towards an Understanding of the Emergence of Financial Risk Management.” Accounting, Organizations and Society 34:638653.
Miyazaki Hirokazu. 2003. “The Temporalities of the Market.” American Anthropologist 105 (2):255265.
Morgan Mary S. 2012. The World in the Model: How Economists Work and Think, Cambridge: Cambridge University Press
Muth John F. 1961. “Rational Expectations and the Theory of Price Movements.” Econometrica 29 (3):315335.
Phillips Damon J., and Zuckerman Ezra W.. 2001. “Middle-Status Conformity: Theoretical Restatement and Empirical Demonstration in Two Markets.” American Journal of Sociology 107 (2):379429.
Power Michael. 2010. “Fair Value Accounting, Financial Economics and the Transformation of Reliability.” Accounting and Business Research 40 (3):197210.
Preda Alex. 2009. Information, Knowledge, and Economic Life: An Introduction to the Sociology of Markets. Oxford: Oxford University Press.
Pryke Michael. 2010. “Money's Eyes: The Visual Preparation of Financial Markets.” Economy and Society 39:427–59.
Scott William Richard. 2003. Organizations. Rational, Natural and Open Systems, 5th ed.Upper Saddle River NJ: Prentice Hall.
Schütz Alfred. [1975] 2003. Strukturen der Lebenswelt. Konstanz: UVK.
Shackley Simon. 2001. “Epistemic Lifestyles in Climate Change Modeling.” In Changing the Atmosphere: Expert Knowledge and Environmental Governance, edited by Miller Clark and Edwards Paul R., 107133. Cambridge: MIT Press.
Simon Jan, Millo Yuval, Kellard Neil, and Engel Ofer. 2011. “Dangerous Connections: Hedge Funds, Brokers and the Construction of a Market Crisis.” Unpublished manuscript, London School of Economics and Political Science. URL <>, last accessed July 3, 2014.
Sombart Werner. 1931. “Einführung in Begriff und Wesen des Wirtschaftssystems.” In Kapital und Kapitalismus: Vorlesungen, edited by Harms Bernhard, 7784. Berlin: Reimar Hobbing Verlag.
Soros George. 1994. The Alchemy of Finance: Reading the Mind of the Market. New York: John Wiley.
Svetlova Ekaterina. 2009. “Theoretical Models as Creative Resources in Financial Markets.” In Rationalität der Kreativität? edited by Jansen Stephan A., Schröter Eckhard, and Stehr Nico, 121135. Wiesbaden: VS Verlag.
Svetlova Ekaterina. 2010. “Arriving at Right Decisions from Wrong Predictions.” Journal of Economic and Financial Practice 10 (1):101113.
Svetlova Ekaterina. 2012. “On the Performative Power of Financial Models. Economy and Society 41 (3):117.
Swidler Ann. 1986. “Culture in Action: Symbols and Strategies.” American Sociological Review 51 (2):273286.
Tversky Amos, and Kahneman Daniel. 1974. “Judgment under Uncertainty: Heuristics and Biases.” Science 185 (4157):11241131.
Wansleben Leon. 2012. “Financial Analysts.” In Handbook of the Sociology of Finance, edited by Cetina Karin Knorr and Preda Alex, 250271. Oxford: Oxford University Press.
Wansleben Leon. 2013. Cultures of Expertise in Global Currency Markets. London: Routledge.
Weber Max. [1920] 2002. The Protestant Ethic and the Spirit of Capitalism, 3rd ed.Oxford: Blackwell.
Yonay Yuval, and Breslau Daniel. 2006. “Marketing Models: The Culture of Mathematical Economics.” Sociological Forum 21 (3):345386.
Zaloom Caitlin. 2006. Out of the Pits: Traders and Technology from Chicago to London. Chicago: University of Chicago Press.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Science in Context
  • ISSN: 0269-8897
  • EISSN: 1474-0664
  • URL: /core/journals/science-in-context
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Full text views

Total number of HTML views: 2
Total number of PDF views: 31 *
Loading metrics...

Abstract views

Total abstract views: 214 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 22nd November 2017. This data will be updated every 24 hours.