 (Mis)information diffusion and the financial marketTommaso Di Francesco and Daniel Torren-Peraire Journal of Economic Behavior & Organization, 2025, vol. 238, issue C Abstract: This paper investigates the interplay between information diffusion in social networks and its impact on financial markets with an Agent-Based Model (ABM). Agents receive and exchange information about an observable stochastic component of the dividend process of a risky asset à la Grossman and Stiglitz (1980). A small proportion of the network has access to a private signal about the component, which can be clean (information) or distorted (misinformation). Other agents are uninformed and can receive information only from their peers. All agents are Bayesian, adjusting their beliefs according to the confidence they have in the source of information. We examine, by means of simulations, how information diffuses in the network and provide a framework to account for delayed absorption of shocks, that are not immediately priced as predicted by classical financial models. We investigate the effect of the network topology on the resulting asset price and evaluate under which condition misinformation diffusion can make the market more inefficient. Keywords: Asset-pricing; Agent-based-model; Information diffusion; Behavioral economics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:238:y:2025:i:c:s0167268125003300 DOI: 10.1016/j.jebo.2025.107211 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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