Download this Paper Open PDF in Browser

A Network Map of Information Percolation

AEA 2017 Annual Meeting Paper
EFA 2017 Annual Meeting Paper
WFA 2017 Annual Meeting Paper

50 Pages Posted: 28 Apr 2016 Last revised: 26 Jul 2017

Björn Hagströmer

Stockholm University - Stockholm Business School

Albert J. Menkveld

VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: July 24, 2017

Abstract

If a security trades in a (partially) decentralized setting, information might percolate across markets in a systematic manner. Such percolation is modeled in a rapidly growing theoretical literature. We test some of its key assumptions and predictions. To do so, we develop an empirical methodology to draw the network map of information percolation. We implement it on CHF-EUR price quotes around the Swiss franc crash. The findings largely support theory. In particular, (private) information percolation is weak at times of strong public information production.

Keywords: network map, information percolation, securities trading, fragmentation

JEL Classification: G10, G14, G15

Suggested Citation

Hagströmer, Björn and Menkveld, Albert J., A Network Map of Information Percolation (July 24, 2017). AEA 2017 Annual Meeting Paper
EFA 2017 Annual Meeting Paper
WFA 2017 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2770313 or http://dx.doi.org/10.2139/ssrn.2770313

Björn Hagströmer

Stockholm University - Stockholm Business School ( email )

Stockholm
Sweden

Albert J. Menkveld (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Paper statistics

Downloads
505
Rank
45,557
Abstract Views
1,607