Structure of investor networks and financial crises

Abstract

In this paper, we ask whether the structure of investor networks, estimated using shareholder registration data, is abnormal during a financial crises. We answer this question by analyzing the structure of investor networks through several most prominent global network features. The networks are estimated from data on marketplace transactions of all publicly traded securities executed in the Helsinki Stock Exchange by Finnish stock shareholders between 1995 and 2016. We observe that most of the feature distributions were abnormal during the 2008-2009 financial crisis, with statistical significance. This paper provides evidence that the financial crisis was associated with a structural change in investors’ trade time synchronization. This indicates that the way how investors use their private information channels changes depending on the market conditions.