Mechanisms of information communication and market price movements. The case of SP 500 market

TL;DR

This paper investigates how information processing among diverse market participants influences SP 500 price movements, using wavelet analysis and a new reflexive communication theory to identify patterns and forecast market dynamics.

Contribution

It introduces a novel theory of reflexive information communication among heterogeneous agents and applies wavelet analysis to model market dynamics and predict future trends.

Findings

Identified distinct patterns in SP 500 market dynamics.

Developed a new theoretical framework for information circulation.

Provided forecasts based on the general mechanisms of information exchange.

Abstract

In this paper we analyze how market prices change in response to information processing among the market participants and how non-linear information dynamics drive market price movement. We analyze historical data of the SP 500 market for the period 1950 -2025 using the logistic Continuous Wavelet Transformation method. This approach allows us to identify various patterns in market dynamics. These patterns are conceptualized using a new theory of reflexive communication of information in a market consisting of heterogeneous agents who assign meaning to information from different perspectives. This allows us to describe market dynamics and make forecasts of its development using the most general mechanisms of information circulation within the content-free approach.