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Institutional Investor Information Networks and Stock Price Synchronicity

Author

Listed:
  • Ziyao Xu
  • Zhiqiang Du
  • Qiran Cheng
  • Xuelan Zhang

Abstract

The inefficiency of information flow in the capital market has led to a significant increase in stock price synchronicity, which has emerged as a critical challenge to the development of emerging capital markets. Based on a complex network perspective, this article investigates the relationship between institutional investor information networks and stock price synchronicity using data from Chinese public fund heavy holdings between 2011 and 2022. Empirical tests show that network correlation significantly reduces stock price synchronicity, while network centrality improves it. Mechanism analysis suggests that the information network affects stock price synchronicity through information diffusion and spillover effects. Furthermore, the analysis shows that the impact of information network structure on stock price synchronicity varies under different market conditions. The findings of this study provide valuable insights for strengthening the supervision of institutional investors’ behavior and reducing stock price synchronicity in emerging markets.

Suggested Citation

  • Ziyao Xu & Zhiqiang Du & Qiran Cheng & Xuelan Zhang, 2024. "Institutional Investor Information Networks and Stock Price Synchronicity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 60(15), pages 3559-3573, December.
    • Handle: RePEc:mes:emfitr:v:60:y:2024:i:15:p:3559-3573
    DOI: 10.1080/1540496X.2024.2354803
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