Communication, networks and asset price dynamics: a survey
Communication, networks and asset price dynamics: a survey
In this paper we provide a wide-ranging survey of the state of the art in the area
of communication and asset price dynamics. We start out by documenting empirical evidence that social communication influences investment decisions and asset prices, before turning to the main modelling approaches in the literature (both past and present). We discuss models of belief-updating based on observed performance; models of herd behaviour; and models with social interactions that arise from preferences for conformity or contrarianism. Our main contribution is to introduce readers to a social network approach which has been widely used in the opinion dynamics literature, but only recently applied to asset pricing. In the final part we show how recent contributions to both modelling and empirical work are using the social network approach to improve
our understanding of financial markets and asset price dynamics. We conclude with some thoughts on fruitful avenues for future research.
Asset pricing, Heterogeneous beliefs, Opinion dynamics, Social networks
Hatcher, Michael
e0846252-6d46-44f8-ba3c-05cf1fba64ab
Hellmann, Tim
e03b4edd-3010-4f6d-831e-86e4b3d6cbe0
18 October 2023
Hatcher, Michael
e0846252-6d46-44f8-ba3c-05cf1fba64ab
Hellmann, Tim
e03b4edd-3010-4f6d-831e-86e4b3d6cbe0
Hatcher, Michael and Hellmann, Tim
(2023)
Communication, networks and asset price dynamics: a survey.
Journal of Economic Interaction and Coordination.
(doi:10.1007/s11403-023-00395-8).
Abstract
In this paper we provide a wide-ranging survey of the state of the art in the area
of communication and asset price dynamics. We start out by documenting empirical evidence that social communication influences investment decisions and asset prices, before turning to the main modelling approaches in the literature (both past and present). We discuss models of belief-updating based on observed performance; models of herd behaviour; and models with social interactions that arise from preferences for conformity or contrarianism. Our main contribution is to introduce readers to a social network approach which has been widely used in the opinion dynamics literature, but only recently applied to asset pricing. In the final part we show how recent contributions to both modelling and empirical work are using the social network approach to improve
our understanding of financial markets and asset price dynamics. We conclude with some thoughts on fruitful avenues for future research.
Text
JEIC_survey
- Accepted Manuscript
Text
s11403-023-00395-8
- Version of Record
More information
Accepted/In Press date: 19 July 2023
Published date: 18 October 2023
Additional Information:
Publisher Copyright:
© 2023, The Author(s).
Keywords:
Asset pricing, Heterogeneous beliefs, Opinion dynamics, Social networks
Identifiers
Local EPrints ID: 481964
URI: http://eprints.soton.ac.uk/id/eprint/481964
ISSN: 1860-711X
PURE UUID: 6b4726a9-6c4e-4de3-afa2-a505b867e71c
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Date deposited: 14 Sep 2023 16:36
Last modified: 18 Mar 2024 03:29
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