Predictable markets? A news-driven model of the stock market

DOI10.3233/AF-150042MaRDI QIDQ4586443zbMATH OpenFDO

Authors Maxim Gusev, Dimitri Kroujiline, Boris Govorkov, S. Sharov, Dmitry Ushanov, Maxim Zhilyaev

Publication date 13 September 2018

Published in Algorithmic Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1404.7364

zbMATH Keywords

agent-based modelsbusiness cycleherdinginvestor behaviorIsinglanguage patternsmarket dynamicsnews analysisnonlinear dynamical systemsprice feedbackreference sentiment levelreturn distributionreturn predictabilitysentiment evolutionstock marketvolatility

Mathematics Subject Classification ID

Economics of information (91B44) Statistical methods; risk measures (91G70)

Abstract: We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market dynamics which we study both empirically and theoretically. We demonstrate that this model replicates observed market behavior on all relevant timescales (from days to years) reasonably well. Using the model, we obtain and discuss a number of results that pose implications for current market theory and offer potential practical applications.

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Cited in

(12)

• A quantum model of supply and demand
• Co-existence of trend and value in financial markets: estimating an extended Chiarella model
• Modeling and forecasting of stock markets under a system adaptation framework
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• Coupled network approach to predictability of financial market returns and news sentiments
• Stock market modeling and forecasting. A system adaptation approach
• The “Fed Model” and the Predictability of Stock Returns*
• Forecasting stock market returns over multiple time horizons
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• Modeling stock market dynamics based on conservation principles
• A model for the dynamic behavior of financial assets affected by news: the case of Tohoku-Kanto earthquake

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