IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v496y2018icp505-513.html
   My bibliography  Save this article

Information networks in the stock market based on the distance of the multi-attribute dimensions between listed companies

Author

Listed:
  • Liu, Qian
  • Li, Huajiao
  • Liu, Xueyong
  • Jiang, Meihui

Abstract

In the stock market, there are widespread information connections between economic agents. Listed companies can obtain mutual information about investment decisions from common shareholders, and the extent of sharing information often determines the relationships between listed companies. Because different shareholder compositions and investment shares lead to different formations of the company’s governance mechanisms, we map the investment relationships between shareholders to the multi-attribute dimensional spaces of the listed companies (each shareholder investment in a company is a company dimension). Then, we construct the listed company’s information network based on co-shareholder relationships. The weights for the edges in the information network are measured with the Euclidean distance between the listed companies in the multi-attribute dimension space. We define two indices to analyze the information network’s features. We conduct an empirical study that analyzes Chinese listed companies’ information networks. The results from the analysis show that with the diversification and decentralization of shareholder investments, almost all Chinese listed companies exchanged information through common shareholder relationships, and there is a gradual reduction in information sharing capacity between listed companies that have common shareholders. This network analysis has benefits for risk management and portfolio investments.

Suggested Citation

  • Liu, Qian & Li, Huajiao & Liu, Xueyong & Jiang, Meihui, 2018. "Information networks in the stock market based on the distance of the multi-attribute dimensions between listed companies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 496(C), pages 505-513.
    • Handle: RePEc:eee:phsmap:v:496:y:2018:i:c:p:505-513
    DOI: 10.1016/j.physa.2017.12.134
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437117313833
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2017.12.134?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bakker, L. & Hare, W. & Khosravi, H. & Ramadanovic, B., 2010. "A social network model of investment behaviour in the stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(6), pages 1223-1229.
    2. Paolo Colla & Antonio Mele, 2010. "Information Linkages and Correlated Trading," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 203-246, January.
    3. Li, Huajiao & An, Haizhong & Gao, Xiangyun & Huang, Jiachen & Xu, Qun, 2014. "On the topological properties of the cross-shareholding networks of listed companies in China: Taking shareholders’ cross-shareholding relationships into account," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 406(C), pages 80-88.
    4. Han N. Ozsoylev & Johan Walden & M. Deniz Yavuz & Recep Bildik, 2014. "Investor Networks in the Stock Market," Review of Financial Studies, Society for Financial Studies, vol. 27(5), pages 1323-1366.
    5. Thomas Lux & Michele Marchesi, 1999. "Scaling and criticality in a stochastic multi-agent model of a financial market," Nature, Nature, vol. 397(6719), pages 498-500, February.
    6. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    7. Cho, Myeonghwan & Jun, Byung-hill, 2013. "Information sharing with competition," Economics Letters, Elsevier, vol. 119(1), pages 81-84.
    8. An, Feng & Gao, Xiangyun & Guan, Jianhe & Li, Huajiao & Liu, Qian, 2016. "An evolution analysis of executive-based listed company relationships using complex networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 447(C), pages 276-285.
    9. Ahern, Kenneth R. & Daminelli, Daniele & Fracassi, Cesare, 2015. "Lost in translation? The effect of cultural values on mergers around the world," Journal of Financial Economics, Elsevier, vol. 117(1), pages 165-189.
    10. Shiller, 021Robert J. & Pound, John, 1989. "Survey evidence on diffusion of interest and information among investors," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 47-66, August.
    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


    Cited by:

    1. Liu, Xueyong & Jiang, Cheng, 2020. "The dynamic volatility transmission in the multiscale spillover network of the international stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 560(C).
    2. Li, Jie & Zhang, Yongjie & Wang, Lidan, 2021. "Information transmission between large shareholders and stock volatility," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lou, Youcheng & Yang, Yaqing, 2023. "Information linkages in a financial market with imperfect competition," Journal of Economic Dynamics and Control, Elsevier, vol. 150(C).
    2. Han, Rui-Qi & Li, Ming-Xia & Chen, Wei & Zhou, Wei-Xing & Stanley, H. Eugene, 2019. "Structural properties of statistically validated empirical information networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 523(C), pages 747-756.
    3. Shi, Wei & Tang, Yinuo, 2015. "Cultural similarity as in-group favoritism: The impact of religious and ethnic similarities on alliance formation and announcement returns," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 32-46.
    4. Wang, Hao & Han, Yonghui & Fidrmuc, Jan & Wei, Dongming, 2021. "Confucius Institute, Belt and Road Initiative, and Internationalization," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 237-256.
    5. Jørgen Vitting Andersen & Ioannis Vrontos & Petros Dellaportas & Serge Galam, 2014. "Communication impacting financial markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00982959, HAL.
    6. L. Bottazzi & M. Da Rin & T. Hellmann, 2007. "The Importance of Trust for Investment: Evidence from Venture Capital," Working Papers 612, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. An, Feng & Gao, Xiangyun & Guan, Jianhe & Huang, Shupei & Liu, Qian, 2017. "Modeling the interdependent network based on two-mode networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 483(C), pages 57-67.
    8. Bing Han & Liyan Yang, 2013. "Social Networks, Information Acquisition, and Asset Prices," Management Science, INFORMS, vol. 59(6), pages 1444-1457, June.
    9. De Silva, Dakshina G. & Gertsberg, Marina & Kosmopoulou, Georgia & Pownall, Rachel A.J., 2022. "Evolution of a dealer trading network and its effects on art auction prices," European Economic Review, Elsevier, vol. 144(C).
    10. Tobias Steindl, 2021. "Cultural rule orientation, legal institutions, and the credibility of corporate social responsibility reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 310-332, January.
    11. Pedersen, Lasse Heje, 2022. "Game on: Social networks and markets," Journal of Financial Economics, Elsevier, vol. 146(3), pages 1097-1119.
    12. Lim, Jongha & Makhija, Anil K. & Shenkar, Oded, 2016. "The asymmetric relationship between national cultural distance and target premiums in cross-border M&A," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 542-571.
    13. Leonardo M. Klüppel & Lamar Pierce & Jason A. Snyder, 2018. "Perspective—The Deep Historical Roots of Organization and Strategy: Traumatic Shocks, Culture, and Institutions," Organization Science, INFORMS, vol. 29(4), pages 702-721, August.
    14. Chuang, Hongwei, 2016. "Brokers’ financial network and stock return," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 172-183.
    15. Chen, Yunyan & Wu, Shinong & Zhou, Yucheng & Huo, Di, 2023. "Gambling culture and corporate violations: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    16. Chung, San-Lin & Liu, Wenchien & Liu, Wen-Rang & Tseng, Kevin, 2018. "Investor network: Implications for information diffusion and asset prices," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 186-209.
    17. Wang, Hu & Li, Shouwei & Ma, Yuyin, 2021. "Herding in Open-end Funds: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    18. Ganglmair, Bernhard & Holcomb, Alex & Myung, Noah, 2020. "Expectations of reciprocity when competitors share information: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 244-267.
    19. Peng Huang & Yue Lu & Robert Faff, 2021. "Social trust and the speed of corporate leverage adjustment: evidence from around the globe," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3261-3303, June.
    20. Liang Wang & Yuanfei Wang & Bixiao Li, 2023. "The influence of the social networks of fund managers on the herding behavior of SIFs in China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:496:y:2018:i:c:p:505-513. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.