Chen, C.; Hu, C.; Wu, L. Feedback Trading, Investor Sentiment and the Volatility Puzzle: An Infinite Theoretical Framework. Mathematics2023, 11, 3148.
Chen, C.; Hu, C.; Wu, L. Feedback Trading, Investor Sentiment and the Volatility Puzzle: An Infinite Theoretical Framework. Mathematics 2023, 11, 3148.
Chen, C.; Hu, C.; Wu, L. Feedback Trading, Investor Sentiment and the Volatility Puzzle: An Infinite Theoretical Framework. Mathematics2023, 11, 3148.
Chen, C.; Hu, C.; Wu, L. Feedback Trading, Investor Sentiment and the Volatility Puzzle: An Infinite Theoretical Framework. Mathematics 2023, 11, 3148.
Abstract
Feedback trading theory is one of the most primitive theories about financial market. But for a long time，researches and modelings on this topic are rarely seen. The model in this paper shows the effects of sentiment shocks on asset prices in a market characterized by feedback trading in the long run. We find that，generally，feedback trading will lead to cognitive bias effect and trading inducement effect. Cognitive bias effect increases with the feedback trading parameter ( FTP) . In our model，the abnormal volatility of asset prices is captured by cognitive bias effect，sentiment shock effect and trading inducement effect．
Keywords
Feedback Trading; Investor Sentiment; the Abnormal Volatility of Asset Prices
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
