NASP International and Interdisciplinary Seminars

David Stark (Columbia University)
Networks as Scopes: Observational Advantage Under Uncertainty

12 April 2019, 14.30
Room A
NASP Graduate School in Social and Political Sciences
Via Pace, 10 - Milan

Abstract

Networks can be like pipes through which information flows, or they can be like prisms through which identities are refracted. To this pair we add a third: networks can be like scopes through which observation can be magnified or blurred. By analyzing the networks formed by producers observing their competitors, we identify the scopic properties of two network structures – dyadic and triadic closure. Dyadic closure, measuring ego's exposure to his direct competitors in different markets, increases the ability to interpret competitors' observed behavior. Triadic closure, measuring the extent to which ego's competitors are exposed to each other in the markets in which ego is not present, reduces the diversity of views to which ego is exposed. We hypothesize that, in networks of observation among competitors, the higher the dyadic closure and the lower the triadic closure, the greater the performance of ego when coping with high market uncertainty. We test our hypothesis by analyzing data on the network of competition created by securities analysts and the stocks they cover. We find that the recommendations issued by an analyst with multiple exposure (high stock coverage overlap) to disconnected competitors (competitors with low stock coverage overlap in the stocks that the focal actor does not cover) yield abnormally high returns especially when confronted by more challenging, high risk, high reward, volatile stocks. 

This seminar is part of the NASP International and Interdisciplinary Seminars Series 2019.