Broker Network Connectivity and the Cross-Section of Expected Stock Returns

Murat Tiniç, Ahmet Sensoy, Muge Demir and Duc Khuong Nguyen

No 2021-002, Working Papers from Department of Research, Ipag Business School

Abstract: We examine the relationship between broker network connectivity and stock returns in an order-driven market. Considering all stocks traded in Borsa Istanbul between January 2006 and November 2015, we estimate the monthly density, reciprocity and average weighted clustering coe!cient as proxies for the broker network connectivity. Our firm-level cross-sectional regressions indicate a negative and significant predictive relationship between connectivity and one-month ahead stock returns. Our analyses also show that stocks in the lowest connectivity quintile earn 1.1% - 1.8% monthly return premiums. The connectivity premium is stronger in terms of both economic and statistical significance for small size stocks.

Keywords: Stock market; trading networks; broker networks, network connectivity, pricing factors (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G24 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2021-01-01
New Economics Papers: this item is included in nep-net
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Working Paper: Broker Network Connectivity and the Cross-Section of Expected Stock Returns (2020)
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