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

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

MPRA Paper from University Library of Munich, Germany

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 coefficient 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 1.0% - 1.6% 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: G1 G12 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-fmk and nep-net
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Related works:
Working Paper: Broker Network Connectivity and the Cross-Section of Expected Stock Returns (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104719

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