The market dynamics of socially embedded trading

Kenneth A. Frank*, Yun Jia Lo, G. Geoffrey Booth, Juha Pekka Kallunki

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

1 Citation (Scopus)


Social embeddedness has provided a compelling challenge to neoclassical descriptions of markets. Nevertheless, without a corresponding description of the micro-social forces that counter embeddedness, the description of embeddedness is essentially static, and does not integrate the dual forces of embeddedness and markets. In this study, we identify a sociological force counter to embeddedness residing in third parties whose presence may interrupt socially embedded informal trading partnerships. Using data from the Helsinki Stock Exchange in 1996–1997, we confirm that stock trades are socially embedded in partnerships in which trading persists from week to week and in which prices deviate from immediate trading prices. Importantly, we find that trading partnerships are more likely to be interrupted when prices deviate from immediate trading prices and when third parties are present who trade with one or both members of the partnership. Thus, third parties are a critical sociological force in the embeddedness-market dynamic.

Original languageEnglish
Pages (from-to)152-181
Number of pages30
Issue number2
Publication statusPublished - 1 May 2019
MoE publication typeA1 Journal article-refereed


  • Social embeddedness
  • third parties
  • trading partnerships


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