48 Pages Posted: 3 Aug 2015
Date Written: May 1, 2015
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market dynamics which we study both empirically and theoretically. We demonstrate that this model replicates observed market behavior on all relevant timescales (from days to years) reasonably well. Using the model, we obtain and discuss a number of results that pose implications for current market theory and offer potential practical applications.
Suggested Citation: Suggested Citation
Gusev, Maxim and Kroujiline, Dimitri and Govorkov, Boris and Sharov, Sergey V. and Ushanov, Dmitry and Zhilyaev, Maxim, Predictable Markets? A News-Driven Model of the Stock Market (May 1, 2015). Algorithmic Finance (2015), 4:1-2, 5-51. Available at SSRN: https://ssrn.com/abstract=2636414