Evolutionary Dynamics of Investors Expectations and Market Price Movement

TL;DR

This paper develops a non-linear evolutionary model linking investors' expectations to market price dynamics, tested across multiple markets, showing potential for forecasting future price movements.

Contribution

Introduces a novel non-linear evolutionary model connecting investor expectations with market prices, validated through empirical data across diverse markets.

Findings

Model predictions are co-integrated with actual asset prices.

The model can be used to forecast future market movements.

Validated across FX, energy, food, and indices markets.

Abstract

The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link between the dynamics of investors' expectations and market price movement. The model for market asset price dynamiscs, based on non-linear evolutionary equation linking investors' expectations and market asset price movement, is provided. Model predictions are tested on various FX, energy, food, and indices markets along different time frames. The results suggest that model predicted time series is co-integrated with asset time series which implies that the prop[osed model can be used to forecast future price movement.