News, Corporate Network and Price Discovery

Workshop on Information in Networks (WIN), September 2011

5 Pages Posted: 28 Mar 2012

See all articles by Germán G. Creamer

Germán G. Creamer

Stevens Institute of Technology, School of Business; Columbia University - Department of Computer Science

Yong Ren

Stevens Institute of Technology - School of Business

Jeffrey V. Nickerson

Stevens Institute of Technology - School of Business

Date Written: September 12, 2011

Abstract

This paper evaluates the role of a corporate network in spreading news and in particular shows how it affects prices. We build daily corporate news network using companies of the STOXX 50 index as nodes; the weights of the edges are the number of news items sharing common topics between companies. The STOXX 50 includes the top 50 European companies by level of capitalization.

We conducted a longitudinal network analysis using the stochastic actor oriented model with daily prices and news for March 2009. We found that there was a 0.55 correlation between the rate of change of the news network and the STOXX 50 index. Even though, the network dynamic by itself cannot fully explain price movements, it can play an important role as part of a predictive model.

Suggested Citation

Creamer, Germán G. and Ren, Yong and Nickerson, Jeffrey V., News, Corporate Network and Price Discovery (September 12, 2011). Workshop on Information in Networks (WIN), September 2011. Available at SSRN: https://ssrn.com/abstract=2029819

Germán G. Creamer (Contact Author)

Stevens Institute of Technology, School of Business ( email )

1 Castle Point on Hudson
Hoboken, NJ 07030
United States
2012168986 (Phone)

HOME PAGE: http://www.creamer-co.com

Columbia University - Department of Computer Science ( email )

New York, NY 10027
United States

Yong Ren

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Jeffrey V. Nickerson

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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