Investor Networks in the Stock Market

Peer Pressure: Social Interaction and the Disposition Effect

“…In line with former, Ozsoylev et al (2014) empirically and theoretically show that better connected investors earn higher profits, while myForexBook traders earn modestly higher returns after exposure to the network (Appendix Section A.5, Table A.6). In line with latter, some argue that there is "social utility" (Becker 1974) or that social interaction reduces participation costs through informal learning (Hong, Kubik, and Stein 2001).…”

Speed of Information Diffusion within Fund Families

“…Our measure of the speed of information diffusion at the family level for quarter t, denoted by SIDt, is computed by averaging the ID measures corresponding to information intervals, the last purchase of which happens during the last four quarters including quarter t. We perform the aggregation over the last four quarters rather than the last quarter, quarter t, to control for possible seasonal effects in information generation as documented in Ozsoylev et al (2014). 14…”

Market Fluctuations Explained by Dividends and Investor Networks

“…However, while actual investor networks and their behaviors have been successfully uncovered [26], or implied through data analysis [31], it is an extremely di±cult task to do so, thus providing the justi¯cations for utilizing simulations, such as the one as provided in this paper, to investigate the possible underlying relationship between the investor networks and the behavior of nancial markets. By using simulations, the claims about how the social network of the investors a®ects the information e±ciency of markets [30] and how the resulting centrality characteristic a®ects the dynamics of a¯nancial market [29,31], can be more thoroughly examined. These works provide the motivation and reference points for the network extensions made to the implemented model, that is the model is designed to assess the e®ect on the pricing behavior of a risky asset resulting from changing the topology of the network that connects the investor population.…”

“…Therefore, the causation of several documented e®ects of the investor networks, including, how the topology of a social network a®ects information e±ciency [30], and the role the centrality plays in determining the dynamics of the market [29,31] can be investigated. The relevance of understanding the dynamics behind herd formation is that it provides insight into how bubbles can form in¯nancial markets.…”