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

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...

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Bibliographic Details
Published in:arXiv.org 2014-09
Main Authors: Gusev, Maxim, Kroujiline, Dimitri, Govorkov, Boris, Sharov, Sergey V, Ushanov, Dmitry, Zhilyaev, Maxim
Format: Article
Language:English
Subjects:
Information flow
Markets
Securities markets
Online Access:Get full text
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Summary: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.
ISSN:2331-8422