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

Gurjeet Dhesi

doi:10.1016/j.chaos.2015.12.015

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

Gurjeet Dhesi

Research output: Contribution to journal › Article › peer-review

26 Citations (Scopus)

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.

Original language	English
Pages (from-to)	119-125
Journal	Chaos, Solitons and Fractals
DOIs	https://doi.org/10.1016/j.chaos.2015.12.015
Publication status	Published - 23 Jan 2016
Externally published	Yes

Keywords

09 Engineering
q-fin.TR
01 Mathematical Sciences
q-fin.MF
Mathematical Physics
08 Information And Computing Sciences

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10.1016/j.chaos.2015.12.015Licence: CC BY-NC-ND 4.0

Cite this

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title = "Modelling and measuring the irrational behaviour of agents in financial markets: Discovering the psychological soliton",

abstract = "{\textcopyright} 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.",

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AB - © 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.

KW - 09 Engineering

KW - q-fin.TR

KW - 01 Mathematical Sciences

KW - q-fin.MF

KW - Mathematical Physics

KW - 08 Information And Computing Sciences

U2 - 10.1016/j.chaos.2015.12.015

DO - 10.1016/j.chaos.2015.12.015

M3 - Article

SN - 0960-0779

SP - 119

EP - 125

JO - Chaos, Solitons and Fractals

JF - Chaos, Solitons and Fractals

ER -

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

Abstract

Keywords

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