Modelling and measuring the irrational behaviour of agents in financial markets: Discovering the psychological soliton
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.
|Authors||Dhesi, G and Ausloos, M|
© 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.
|Keywords||q-fin.TR; q-fin.TR; q-fin.MF; 01 Mathematical Sciences; 09 Engineering; 08 Information And Computing Sciences; Mathematical Physics|
|Journal||Chaos, Solitons and Fractals|
|Journal citation||88 (July), pp. 119-125|
|Digital Object Identifier (DOI)||doi:10.1016/j.chaos.2015.12.015|
|23 Jan 2016|
|Publication process dates|
|Deposited||08 Mar 2017|
|Accepted||16 Dec 2015|
|Accepted author manuscript|
CC BY-NC-ND 4.0
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