Advanced Search
MyIDEAS: Login to save this article or follow this journal

Social network influence and market instability

Contents:

Author Info

  • Yang, J.-H. Steffi
Registered author(s):

    Abstract

    Models of social networks depict individuals' dependency. They offer a systematic way to capture the connectedness and opinion formations in the complex web of interpersonal influences. This paper studies price stability of a capital market, where the dynamics of participants' opinion formations is formalized using social network models. Stability condition is derived. It is also identified how network structures are important in communications and in determining market stability. It is found that factors of highly-connected networks and balanced weight allocation on information sources can in fact be stabilizing. In applications, this study supports the view that the key to reduce the volatility behaviour of emerging-market securities lies in the development of an efficient investor base. It is suggested that one way to achieve this is by broadening and diversifying both the international and domestic investor categories for the underlying market.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6VBY-4TVJ3PN-1/2/873b2a0983ce7b37f17c8af2cc4b168e
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Mathematical Economics.

    Volume (Year): 45 (2009)
    Issue (Month): 3-4 (March)
    Pages: 257-276

    as in new window
    Handle: RePEc:eee:mateco:v:45:y:2009:i:3-4:p:257-276

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/jmateco

    Related research

    Keywords: Social networks Expectation formation Market stability;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
    2. Eric Briys & François de Varenne, 1996. "On the Risk of Life Insurance Liabilities: Debunking Some Common Pitfalls," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 96-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    4. Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198296942, October.
    5. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(3), pages 797-817, August.
    7. Leigh Tesfatsion, 2000. "Hysteresis in an Evolutionary Labor Market with Adaptive Search," Computational Economics, EconWPA 0004003, EconWPA.
    8. Topa, Giorgio, 1997. "Social Interactions, Local Spillovers and Unemployment," Working Papers, C.V. Starr Center for Applied Economics, New York University 97-17, C.V. Starr Center for Applied Economics, New York University.
    9. Tesfatsion, Leigh, 1998. "Preferential Partner Selection in Evolutionary Labor Markets: A Study in Agent-Based Computational Economics," Staff General Research Papers 4063, Iowa State University, Department of Economics.
    10. Edward E. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995. "Crime and Social Interactions," Harvard Institute of Economic Research Working Papers 1738, Harvard - Institute of Economic Research.
    11. Marianne Bertrand & Erzo Luttmer & Sendhil Mullainathan, 1998. "Network Effects and Welfare Cultures," Working Papers 784, Princeton University, Department of Economics, Industrial Relations Section..
    12. Tesfatsion, Leigh, 1997. "A Trade Network Game with Endogenous Partner Selection," Staff General Research Papers 1680, Iowa State University, Department of Economics.
    13. A. Banerjee & Drew Fudenberg, 2010. "Word-of-Mouth Communication and Social Learning," Levine's Working Paper Archive 425, David K. Levine.
    14. Leigh Tesfatsion, 2000. "Structure, Behavior, and Market Power in an Evolutionary Labor Market with Adaptive Search," Computational Economics, EconWPA 0004002, EconWPA.
    15. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
    16. Dutta, Bhaskar & Mutuswami, Suresh, 1997. "Stable Networks," Journal of Economic Theory, Elsevier, vol. 76(2), pages 322-344, October.
    17. Weisbuch, G. & Kirman, A.P. & Herreiner, D., 1996. "Market Organisation," G.R.E.Q.A.M., Universite Aix-Marseille III 96a20, Universite Aix-Marseille III.
    18. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    19. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 966-91, October.
    20. Kirman, Alan P., 1983. "Communication in markets : A suggested approach," Economics Letters, Elsevier, vol. 12(2), pages 101-108.
    21. Borjas, George J, 1995. "Ethnicity, Neighborhoods, and Human-Capital Externalities," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 365-90, June.
    22. Gerard Weisbuch & Alain Kirman & EHESS, . "Market Organizations for Perishable Goods," Computing in Economics and Finance 1997, Society for Computational Economics 60, Society for Computational Economics.
    23. Alan Kirman, 1997. "The economy as an evolving network," Journal of Evolutionary Economics, Springer, Springer, vol. 7(4), pages 339-353.
    24. Allen, Beth, 1982. "Some Stochastic Processes of Interdependent Demand and Technological Diffusion of an Innovation Exhibiting Externalities among Adopters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 595-608, October.
    25. David Blake, 2003. "Financial system requirements for successful pension reform," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 24862, London School of Economics and Political Science, LSE Library.
    26. Kirman, Alan P. & Vriend, Nicolaas J., 2001. "Evolving market structure: An ACE model of price dispersion and loyalty," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(3-4), pages 459-502, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Grabisch, Michel & Rusinowska, Agnieszka, 2011. "A model of influence with a continuum of actions," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 576-587.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:mateco:v:45:y:2009:i:3-4:p:257-276. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.