MEME: Modeling the Evolutionary Modes of Financial Markets

TL;DR

MEME introduces a novel logic-oriented framework for modeling financial markets as evolving ecosystems of investment narratives, leveraging multi-agent extraction and Gaussian Mixture Modeling to improve market understanding and portfolio decisions.

Contribution

The paper proposes MEME, a new approach that models market dynamics through evolving investment logics, integrating semantic analysis and lifecycle tracking for better market insight.

Findings

Outperforms seven SOTA baselines on Chinese stock data.

Effectively captures market evolution and consensus shifts.

Demonstrates robustness through ablation and sensitivity analyses.

Abstract

LLMs have demonstrated significant potential in quantitative finance by processing vast unstructured data to emulate human-like analytical workflows. However, current LLM-based methods primarily follow either an Asset-Centric paradigm focused on individual stock prediction or a Market-Centric approach for portfolio allocation, often remaining agnostic to the underlying reasoning that drives market movements. In this paper, we propose a Logic-Oriented perspective, modeling the financial market as a dynamic, evolutionary ecosystem of competing investment narratives, termed Modes of Thought. To operationalize this view, we introduce MEME (Modeling the Evolutionary Modes of Financial Markets), designed to reconstruct market dynamics through the lens of evolving logics. MEME employs a multi-agent extraction module to transform noisy data into high-fidelity Investment Arguments and utilizes Gaussian Mixture Modeling to uncover latent consensus within a semantic space. To model semantic drift among different market conditions, we also implement a temporal evaluation and alignment mechanism to track the lifecycle and historical profitability of these modes. By prioritizing enduring market wisdom over transient anomalies, MEME ensures that portfolio construction is guided by robust reasoning. Extensive experiments on three heterogeneous Chinese stock pools from 2023 to 2025 demonstrate that MEME consistently outperforms seven SOTA baselines. Further ablation studies, sensitivity analysis, lifecycle case study and cost analysis validate MEME's capacity to identify and adapt to the evolving consensus of financial markets. Our implementation can be found at https://github.com/gta0804/MEME.