We analyze a recently proposed spatial autoregressive model for stock returns and compare it to a one-factor model and the sample covariance matrix. The influence of refinements to these covariance estimation methods is studied. We employ power mapping as a noise reduction technique for the...

We follow the seminal work of Paelinck (1978) who introduces spatial interdependence of, i.e. income, expenditure, investment, to classic Keynesian economic models, and estimate a spatial factor model. Asset prices may display characteristics of spatial dependence meaning spatial proximity can...

We analyze a rational expectations equilibrium model to explore the implications of information networks for the financial market. When information is exogenous, social communication improves market efficiency. However, social communication crowds out information production due to traders'...