Investor Network: Implications for Information Diffusion and Asset Prices (original) (raw)

Intra-industry information diffusion in China's stock market

Economics Bulletin, 2017

This study concentrates its attention on the China stock market, and employs the panel data and the time-series data methodologies to explore the occurrence of intra-industry information diffusion. The results show the existence of a gradual occurrence of intra-industry information diffusion in China's stock market, by means of a significant lead-lag relationship between big firms and small firms. This paper further confirms that gradual information diffusion actually appears within an industry rather than across the different industries of a national entity. We also respectively analyze a number of individual industries with different suitable lag lengths. We discover a useful finding that fairly predicts according to different industries in China, a wisdom that investors ought to choose some high quality small firms in the appropriate investment timing from the same industry rather than seeking investment opportunities in the whole market, whenever any good common information ...

Financial market-a network perspective

2006

We construct a weighted financial network for a subset of NYSE traded stocks, in which the nodes correspond to stocks and edges to interactions between them. We identify clusters of stocks in the network, based on the Forbes business sector classification, and study their intensity and coherence. Our approach indicates to what extent the business sector classifications are visible in market prices, enabling us to gauge the extent of group-behaviour exhibited by stocks belonging to a given business sector.

Biased Information Transmission in Investor Social Networks: Evidence from Professional Traders

2020

Theoretical studies postulate that information transmission in investor social networks has important implications for diverse market phenomena, including trading volume, price informativeness, liquidity, volatility, and trading strategies. Yet, we have limited knowledge about the real-world links among information exchange, trading decisions, and performance in investor social networks. Using more than 1 million instant message communications and more than 2 million trading records of professional traders, we directly measure how information propagates through traders’ strong and weak network ties and its effects on their trading decisions and performance. Our results suggest that investment information sharing is asymmetric: traders are more likely to exchange information on trading gains over losses, especially with their strong ties. However, message receivers are more likely to trade on information from strong ties when the information regards trading losses rather than trading...

Investor attention, information diffusion and industry returns

Pacific-Basin Finance Journal , 2014

Using the monthly data for more than 1700 Australian stocks over the period from 1990 to 2009, we investigate whether industry portfolio returns predict the aggregate market. We find that a few industries significantly lead the market even controlling for well-recognized market predictors. However, unlike U.S. studies, we do not find that the ability of an industry to predict the market is closely related to its propensity to forecast economic growth. Instead, we find that the capacity of an industry to lead the market is significantly moderated by proxies for investor attention. In general, more neglected industries are more informative in leading the markets due to delayed investor attention to the information content of these industries; and the information contained in industry portfolio returns is incorporated into the market return more slowly during economic recession when investors pay less attention to the stock markets. Our research provides new empirical evidence in support of the gradual information diffusion hypothesis from a market that differs from the U.S. stock market.

Underwriter networks, investor attention, and initial public offerings

Journal of Financial Economics, 2016

Using various centrality measures from social network analysis, we analyze how the loca- tion of a lead initial public offering (IPO) underwriter in its network of investment banks affects various IPO characteristics. We hypothesize that investment banking networks allow lead IPO underwriters to induce institutions to pay attention to the firms they take pub- lic and to perform two information-related roles during the IPO process: an information dissemination role, in which the lead underwriter uses its investment banking network to disseminate noisy information about various aspects of the IPO firm to institutional investors; and an information extraction role, in which the lead underwriter uses its invest- ment banking network to extract information useful in pricing the IPO firm equity from institutional investors. Based on these two roles, we develop testable hypotheses relating lead IPO underwriter centrality to the IPO characteristics of firms they take public. We find that more central lead IPO underwriters are associated with larger absolute values of offer price revisions, greater IPO and after-market valuations, larger IPO initial returns, greater institutional investor equity holdings and analyst coverage immediately post-IPO, greater stock liquidity post-IPO, and better long-run stock returns. Using a hand-collected data set of pre-IPO media coverage as a proxy for investor attention, we show that an important channel through which more central lead IPO underwriters achieve favorable IPO characteristics is by attracting greater investor attention to the IPOs underwritten by them.