Information Revelation in Decentralized Markets

Björn Hagströmer, Albert J. Menkveld

Research output: Contribution to JournalArticleAcademicpeer-review


How does information get revealed in decentralized markets? We test several hypotheses inspired by recent dealer-network theory. To do so, we construct an empirical map of information revelation where two dealers are connected based on the synchronicity of their quote changes. The tests, based on the euro to Swiss franc spot rate (EUR/CHF) quote data including the 2015 crash, largely support theory: strongly connected (i.e., central) dealers are more informed. Connections are weaker when there is less to be learned. The crash serves to identify how a network forms when dealers are transitioned from no-learning to learning, that is, from a fixed to a floating rate.

Original languageEnglish
Pages (from-to)2751-2787
Number of pages37
JournalJournal of Finance
Issue number6
Publication statusPublished - 1 Dec 2019


Björn Hagströmer is with Stockholm Business School, Stockholm University. Albert J. Menkveld ( is with Vrije Universiteit Amsterdam (VU) and Tinbergen Institute. We thank Stefan Nagel (the Editor), an anonymous associate editor, and three anonymous referees for many helpful comments. We are also grateful for comments by Ben Craig; Serge Darolles; Lorenzo Frattarolo; Joel Hasbrouck; Erik Hjalmarsson; Andrei Kirilenko; Youwei Li; Dmitry Livdan; Artem Neklyudov; Chengcheng Qu; Dagfinn Rime; Ekaterina Serikova; Erkki Silde; Marco van der Leij; Vincent van Kervel; Shihao Yu; and Shengxing Zhang; as well as seminar/conference participants at Aarhus University, AEA, Banque de France, BIS, Copenhagen Business School, EFA, Financial Conduct Authority, Higher School of Economics Moscow, NHH Bergen, SoFiE Annual Meeting, Stevens Institute of Technology, Stockholm Business School, Université catholique de Louvain, University of Gothenburg, University of Toronto, University of Toulouse, University of Stavanger, University of Zurich, and WFA. An earlier version of this manuscript was circulated under the title . Hagströmer is a visiting research fellow at Swedish House of Finance. He gratefully acknowledges the Jan Wallander Foundation and Tom Hedelius Foundation for research funding. Menkveld gratefully acknowledges NWO for a Vidi grant. The authors have no material financial or nonfinancial interests related to this research, as identified in the disclosure policy. A Network Map of Information Percolation Journal of Finance

FundersFunder number
Jan Wallanders och Tom Hedelius Stiftelse samt Tore Browaldhs Stiftelse
Nederlandse Organisatie voor Wetenschappelijk Onderzoek
Jan Wallander Foundation


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