The 2008 Crisis from the Neurofinance Perspective: Investor Humor and Market Sentiment

23 Pages Posted: 30 Sep 2013

See all articles by Armando da Rocha

Armando da Rocha

Research on Artificial and Natural Intelligence (RANI)

Roberto Lima Filho

University of Sao Paulo, School of Medicine

Heitor Costa

Universidade Federal de Lavras - UFLA

Igor Lima

Universidade Federal de Lavras - UFLA

Date Written: September 27, 2013

Abstract

The world is still facing a financial crisis that started in mid 2007 and up to moment it is unsolved. Stock markets around the world reacted badly and the real time news has never played such an important role to investors as seen in previous crises. The impact of the media deepened the bear dynamics of markets around the world amplifying their volatility. Neurofinances is a new field of inquiring that has the purpose of studying decision making taking into consideration the role played by emotion. Here, we use these notions to develop a neurofinance modelling of the Brazilian stock market assuming that the investor humor is dependent on the ratio between perceived benefit and risk, as well as market sentiment. Market sentiment, in turn, is proposed to be sensitive to the kind of news delivered by the media. The model is used to study the BMFBovespa index (Ibov) evolution from January, 2003 to September, 2010 in order to test if these hypotheses hold and whether market sentiment is sensitive to an index of Good/Bad news about Ibov. Results supported present propositions.

Keywords: Finance Theory, Neurofinances, Statistic models, Decision Theory, Financial Crisis

JEL Classification: G01, G14, G17, D87

Suggested Citation

da Rocha, Armando and Lima Filho, Roberto and Costa, Heitor and Lima, Igor, The 2008 Crisis from the Neurofinance Perspective: Investor Humor and Market Sentiment (September 27, 2013). Available at SSRN: https://ssrn.com/abstract=2332200 or http://dx.doi.org/10.2139/ssrn.2332200

Armando Da Rocha (Contact Author)

Research on Artificial and Natural Intelligence (RANI) ( email )

Rua Tenente Ary Aps, 172
Jundiai, 13207-110
Brazil

Roberto Lima Filho

University of Sao Paulo, School of Medicine ( email )

Av. Dr. Arnaldo, 455
São Paulo, São Paulo 01246903
Brazil

HOME PAGE: http://www.fm.usp.br

Heitor Costa

Universidade Federal de Lavras - UFLA ( email )

Lavras, Minas Gerais
Brazil

Igor Lima

Universidade Federal de Lavras - UFLA ( email )

Lavras, Minas Gerais
Brazil

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