 THE EPISTEMOLOGICAL ROLE OF S&P 500 SIGNAL’S NONSTATIONARITY ON INVESTORS’ DYNAMIC SENTIMENT FORMATION: EVIDENCE FOR INVESTORS’ PROSPECT THEORY PREFERENCESGojart Kamberi
UTMS Journal of Economics, 2023, vol. 14, issue 2, 160-165 Abstract: Financial signals’ abrupt spectral changes in temporal scale correspond to the perception bias on risk which is a well-known epistemologically decision-making factor in behavioral finance research. In this paper, we explored the epistemological role of S&P 500 signal’s non-stationarity on investors’ sentiment formation, by analyzing the time-frequency dependency of investors’ sentiment on the S&P 500 through a cross wavelet transform analysis to further explore their wavelet coherence (co-movements). Results indicate that S&P 500 signal’s abrupt spectral changes across time do have a statistically significant impact on the investors’ sentiment formation. Moreover, a comparative analysis of the wavelet coherences between the Bullish/Bearish market sentiments and the S&P 500’s signal, reveals the investors’ dynamic (historical) epistemological bias toward risk, which corresponds with the dynamic prospect theory investment preferences. Keywords: signal; sentiment; time; frequency; epistemology (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:utmsje:0354 Access Statistics for this article UTMS Journal of Economics is currently edited by Prof. Ace Milenkovski, PhD More articles in UTMS Journal of Economics from University of Tourism and Management, Skopje, Macedonia Contact information at EDIRC. |
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