Modelling and measuring the irrational behaviour of agents in financial markets: Discovering the psychological soliton

Journal article

Dhesi, G and Ausloos, M (2016). Modelling and measuring the irrational behaviour of agents in financial markets: Discovering the psychological soliton. Chaos, Solitons and Fractals. 88 (July), pp. 119-125. https://doi.org/10.1016/j.chaos.2015.12.015
AuthorsDhesi, G and Ausloos, M
Abstract

© 2015 Elsevier Ltd.Following a Geometrical Brownian Motion extension into an Irrational fractional Brownian Motion model, we re-examine agent behaviour reacting to time dependent news on the log-returns thereby modifying a financial market evolution. We specifically discuss the role of financial news or economic information positive or negative feedback of such irrational (or contrarian) agents upon the price evolution. We observe a kink-like effect reminiscent of soliton behaviour, suggesting how analysts' forecasts errors induce stock prices to adjust accordingly, thereby proposing a measure of the irrational force in a market.

Keywordsq-fin.TR; q-fin.TR; q-fin.MF; 01 Mathematical Sciences; 09 Engineering; 08 Information And Computing Sciences; Mathematical Physics
Year2016
JournalChaos, Solitons and Fractals
Journal citation88 (July), pp. 119-125
PublisherElsevier
ISSN0960-0779
Digital Object Identifier (DOI)https://doi.org/10.1016/j.chaos.2015.12.015
Web address (URL)https://www.sciencedirect.com/science/article/abs/pii/S0960077915004336?via%3Dihub
Publication dates
Print23 Jan 2016
Publication process dates
Deposited08 Mar 2017
Accepted16 Dec 2015
Accepted author manuscript
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Open
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