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Price dynamics, social networks and communication

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  • Li, Bingqing
  • Wang, Lijia
  • Lu, Guoxiang

Abstract

A stock price dynamics model is developed in consideration of social network communication in financial markets. Considering a nonlinear feedback effect of price returns, we establish a self-organising system of price dynamics. Results show that the movement of prices depends on the topologies of networks and the communication effect. Furthermore, the self-reinforcing feature of price dynamics is explored and bubbles and crashes are explained as alternate strong positive and negative self-reinforcing processes of prices.

Suggested Citation

  • Li, Bingqing & Wang, Lijia & Lu, Guoxiang, 2017. "Price dynamics, social networks and communication," Finance Research Letters, Elsevier, vol. 22(C), pages 197-201.
    • Handle: RePEc:eee:finlet:v:22:y:2017:i:c:p:197-201
    DOI: 10.1016/j.frl.2017.06.013
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    References listed on IDEAS

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    1. Panchenko, Valentyn & Gerasymchuk, Sergiy & Pavlov, Oleg V., 2013. "Asset price dynamics with heterogeneous beliefs and local network interactions," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2623-2642.
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    9. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2005. "Thy Neighbor's Portfolio: Word‐of‐Mouth Effects in the Holdings and Trades of Money Managers," Journal of Finance, American Finance Association, vol. 60(6), pages 2801-2824, December.
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    2. Qin, Yao & Shi, Linda Hui & Song, Lei & Stöttinger, Barbara & Tan, Kang (Frank), 2018. "Integrating consumers’ motives with suppliers’ solutions to combat Shanzhai: A phenomenon beyond counterfeit," Business Horizons, Elsevier, vol. 61(2), pages 229-237.

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    More about this item

    Keywords

    Price dynamics; Social networks; Bubbles and crashes;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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