Analyzing Stock Brokers' Trading Patterns: A Network Decomposition and Spatial Econometrics Approach

Juan Eberhard, Jaime F. Lavín, Alejandro Montecinos-Pearce, José Arenas, Ahmet Sensoy

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Using a unique data set with all the daily transactions from the Santiago Stock Exchange, we develop a novel methodology that combines a network decomposition with a spatial econometrics technique to study how brokers' characteristics and trading decisions may affect the stock market return. We present suggestive evidence of a mechanism by which structural changes of the transaction network between brokers affect the aggregate returns of the stock market. We find that brokers tend to trade with counterparties with dissimilar intraday selling volume when market return significantly increases. Moreover, brokers with a research department tend to sell to brokers without a research department when the market experiences a considerable increase of its return. From the financial perspective, these results highlight new ways in which intermediaries may affect market equilibrium and the efficiency of the market.

Original languageEnglish
Article number7490640
JournalComplexity
Volume2019
DOIs
StatePublished - 2019

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