Network Analysis of Money Flows in Stock Markets

29 Pages Posted: 19 Apr 2023 Last revised: 26 Apr 2023

See all articles by Joonas Karaila

Joonas Karaila

Nordea Bank Abp

Kęstutis Baltakys

Tampere University

Henri Hansen

Tampere University

Juho Kanniainen

Tampere University

Date Written: April 26, 2023

Abstract

We introduce the formation a network of money flows between assets in stock markets, which captures directed relations between assets in terms of how investors have re-allocated money in the stock exchange. Our approach is based on identifying a directed link, or money flow, that occurs when an investor funds a purchase of an asset by selling another asset(s). We extract investor-level money flow networks on daily bases from shareholder registration data, which are then aggregated for both financial institutional and retail investors. Overall, we have a time series of 877 daily networks from 2006 to 2009, which is exceptionally long data on temporal networks. Through our analysis of non-reciprocated triadic patterns in the aggregated money-flow networks, we find that these patterns are both recurrent and significant. Additionally, we observe that the counts on different triadic motifs exhibit not only an autoregressive process but are also interconnected contemporaneously and dynamically. These findings suggest the need for further research using sophisticated network models to provide a comprehensive representation of money flows in stock markets.

Suggested Citation

Karaila, Joonas and Baltakys, Kęstutis and Hansen, Henri and Kanniainen, Juho, Network Analysis of Money Flows in Stock Markets (April 26, 2023). Available at SSRN: https://ssrn.com/abstract=4410662 or http://dx.doi.org/10.2139/ssrn.4410662

Joonas Karaila

Nordea Bank Abp ( email )

Copenhagen
Denmark

Kęstutis Baltakys

Tampere University ( email )

Tampere, FIN-33101
Finland

Henri Hansen

Tampere University ( email )

Tampere, FIN-33101
Finland

Juho Kanniainen (Contact Author)

Tampere University ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

HOME PAGE: http://https://sites.google.com/site/juhokanniainen/

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