Sentiment and Feedback in Financial Markets
Read
DownLoad |
| Title | Sentiment and Feedback in Financial Markets
|
| Author | Hu Changsheng and Chi Yangchun |
| Organization | Economics and Management School of Wuhan University; Economics and Management School of Wuhan University |
| Email | hcs_xj@whu.edu.cn |
| Key Words | Feedback Trading; Sentiment Shock; Under- and Overreaction; the Abnormal Volatility of Asset Prices |
| Abstract | Under- and overreaction is basis of many behavioral models. However, the existing applications of under- and overreaction are limited to cross-sectional anomalies. In this paper, we propose an infinite horizon model in which the market is characterized by general noiseand feedback traders to study the abnormal volatility of asset prices, and apply under- and overreaction to aggregate market. The first-moment study is extended to the second. This contributes to feedback trading models that have rarely been seen. We decompose the factors triggering abnormal volatility and study it from micro level. In the meanwhile, our empirical study supports the corollaries of our model, which shows that the dual-factor driving feedback system in this paper captures the characteristics of market fluctuation. |
| Serial Number | WP302 |
| Time | 2012-07-13 |
|