Modelling and measuring the irrational behaviour of agents in financial markets: Discovering the psychological solitonAuthor-Name: Dhesi, Gurjeet

Marcel Ausloos

Chaos, Solitons & Fractals, 2016, vol. 88, issue C, 119-125

Abstract: 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: Geometric Brownian Motion; Irrational fractional Brownian Motion; Irrational behaviour; Soliton (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:88:y:2016:i:c:p:119-125

DOI: 10.1016/j.chaos.2015.12.015

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