IDEAS home Printed from https://ideas.repec.org/a/eee/dyncon/v173y2025ics0165188925000259.html
   My bibliography  Save this article

Networks, beliefs, and asset prices

Author

Listed:
  • Hatcher, Michael
  • Hellmann, Tim

Abstract

We set out a novel social communication model of asset prices. An investor's type – which depends on their network and investment performance – determines their price beliefs. We show how properties of the network such as network centrality and diameter influence the price dynamics, convergence speed, and limiting belief types. For the polar cases of no attention to performance and exclusive attention to performance, we obtain analytically tractable results relating price and belief types to properties of the network, while for intermediate attention to performance we rely on numerical results. As applications, our model can explain price bubbles and price oscillations by network-performance effects, and we also study how price and type dynamics depend on connectedness on a small-world network. Our results shed light on when performance-based updating of beliefs on social networks is stabilising – or destabilising – for asset prices. A key finding is that the impact of network structure on asset prices and beliefs depends on how much attention investors pay to performance.

Suggested Citation

  • Hatcher, Michael & Hellmann, Tim, 2025. "Networks, beliefs, and asset prices," Journal of Economic Dynamics and Control, Elsevier, vol. 173(C).
  • Handle: RePEc:eee:dyncon:v:173:y:2025:i:c:s0165188925000259
    DOI: 10.1016/j.jedc.2025.105059
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165188925000259
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jedc.2025.105059?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Asset pricing; Social networks; Heterogeneous beliefs; Opinion dynamics;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:173:y:2025:i:c:s0165188925000259. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jedc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.