Identification of information networks in stock markets

Margarita Baltakienė, Juho Kanniainen and Kęstutis Baltakys

Journal of Economic Dynamics and Control, 2021, vol. 131, issue C

Abstract: We introduce a novel method to identify information networks in stock markets, which explicitly accounts for the impact of public information on investor trading decisions. We show that public information has a clear effect on the empirical investor networks’ topology. Most importantly, our method strengthens the identified relationship between investors’ network centrality and returns. Furthermore, when less significant links are removed, the association between centrality and returns becomes statistically and economically stronger. Findings suggest that our approach leads to a more precise representation of the information network.

Keywords: Information channels; Information transfer; Investor network; Network inference; Private information; Public information (search for similar items in EconPapers)
JEL-codes: D8 G10 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:131:y:2021:i:c:s0165188921001524

DOI: 10.1016/j.jedc.2021.104217

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