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Network centrality, information diffusion and asset pricing

Author

Listed:
  • Yu, Miao
  • Hu, Xiaolu
  • Zhong, Angel

Abstract

This paper empirically investigates the asset pricing implications of trade network topology in the Australian equity market, emphasizing its role in economic shock propagation and information dissemination. We explore the influence of industries' network positions on the paradigm of risk and return. Empirical results demonstrate that industries located in the centre of the trade network, benefiting from diversified trade relations, yield lower returns without heightened exposure to systematic risk. Exploring the interplay between network centrality and information diffusion, we find that information transmission is slower among central firms due to attention constraints of investors and the complexity involved in analyzing them.

Suggested Citation

  • Yu, Miao & Hu, Xiaolu & Zhong, Angel, 2024. "Network centrality, information diffusion and asset pricing," International Review of Financial Analysis, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001558
    DOI: 10.1016/j.irfa.2024.103223
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    More about this item

    Keywords

    Trade network; Asset pricing; Information diffusion; Spillover; Centrality;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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