Abstract
We study investor networks in the stock market, through the lens of information network theory. We use a unique account level dataset of all trades on the Istanbul Stock Exchange in 2005, to identify traders who are similar in their trading behavior as linked in an empirical investor network (EIN). This empirical investor network is consistent with several predictions from the theory of information networks. The EIN is relatively stable over time, some investors systematically trade before their neighbors in the network, centrally placed investors earn higher profits, and the cross sectional distributions of profits and trading volume are heavy-tailed with similar tail exponents. We also identify several theoretical challenges for future research.
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