Modelling and Measuring the Irrational behaviour of Agents in Financial Markets: Discovering the Psychological Soliton

摘要

Following a Geometrical Brownian Motion extension into an IrrationalFractional Brownian Motion model, we re-examine agent behaviour reacting totime dependent news on the log-returns thereby modifying a financial marketevolution. We specifically discuss the role of financial news or economicinformation positive or negative feedback of such irrational (or contrarian)agents upon the price evolution. We observe a kink-like effect reminiscent ofsoliton behaviour, suggesting how analysts' forecasts errors induce stockprices to adjust accordingly, thereby proposing a measure of the irrationalforce in a market.