Institutional investor network, analyst public information and extreme risks

Abstract

This paper builds the institutional investor network on the basis of the common stock holdings of mutual funds with large positions. Institutional investors share and interact private information through social networks. Seen from separating private and public information, the effects of private information sharing in institutional investor networks and the effects of public information diffusion on extreme risks are examined, respectively. Then, the integrated impact of institutional investor information sharing with analyst on extreme risks is analysed. Empirical research has found that analyst public information spread will decrease the probability of extreme risks. The information sharing in social network of institutional investors will restrain stock market extreme risks. The closer network of institutional investors lower the influence of analyst public information on extreme risks. In addition, we also found that stock liquidity has weakened the inhibition of fund network information sharing on extreme risks. The research results provide reference for the authorities to regulate market participant behaviours so as to avoid risks.