The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.

The sustainability of stock price fluctuations indicated by many empirical studies hardly reconciles with the existing models in standard financial theories. This paper proposes a recursive dynamic asset pricing model based on the comprehensive impact of the sentiment investor, the information trade...

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Main Authors:	Jun Xie, Wenqian Xia, Bin Gao
Format:	article
Language:	EN
Published:	Public Library of Science (PLoS) 2021
Subjects:	Medicine R Science Q
Online Access:	https://doaj.org/article/e3a0fbfe013c444186727c5d7d12f462
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id	oai:doaj.org-article:e3a0fbfe013c444186727c5d7d12f462
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spelling	oai:doaj.org-article:e3a0fbfe013c444186727c5d7d12f4622021-12-02T20:15:00ZThe sustainability of stock price fluctuations: Explanation from a recursive dynamic model.1932-620310.1371/journal.pone.0255081https://doaj.org/article/e3a0fbfe013c444186727c5d7d12f4622021-01-01T00:00:00Zhttps://doi.org/10.1371/journal.pone.0255081https://doaj.org/toc/1932-6203The sustainability of stock price fluctuations indicated by many empirical studies hardly reconciles with the existing models in standard financial theories. This paper proposes a recursive dynamic asset pricing model based on the comprehensive impact of the sentiment investor, the information trader and the noise trader. The dynamic process of the asset price is characterized and a numerical simulation of the model is provided. The model captures the features of the actual stock price that are consistent with the empirical evidence on the sustainability of stock price fluctuations. It also offers a partial explanation for other financial anomalies, for example, asset price's overreaction, asset bubble and the financial crisis. The major finding is that investor sentiment is the key factor to understand the sustainability of stock price fluctuations.Jun XieWenqian XiaBin GaoPublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 16, Iss 8, p e0255081 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Jun Xie Wenqian Xia Bin Gao The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
description	The sustainability of stock price fluctuations indicated by many empirical studies hardly reconciles with the existing models in standard financial theories. This paper proposes a recursive dynamic asset pricing model based on the comprehensive impact of the sentiment investor, the information trader and the noise trader. The dynamic process of the asset price is characterized and a numerical simulation of the model is provided. The model captures the features of the actual stock price that are consistent with the empirical evidence on the sustainability of stock price fluctuations. It also offers a partial explanation for other financial anomalies, for example, asset price's overreaction, asset bubble and the financial crisis. The major finding is that investor sentiment is the key factor to understand the sustainability of stock price fluctuations.
format	article
author	Jun Xie Wenqian Xia Bin Gao
author_facet	Jun Xie Wenqian Xia Bin Gao
author_sort	Jun Xie
title	The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
title_short	The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
title_full	The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
title_fullStr	The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
title_full_unstemmed	The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.
title_sort	sustainability of stock price fluctuations: explanation from a recursive dynamic model.
publisher	Public Library of Science (PLoS)
publishDate	2021
url	https://doaj.org/article/e3a0fbfe013c444186727c5d7d12f462
work_keys_str_mv	AT junxie thesustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel AT wenqianxia thesustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel AT bingao thesustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel AT junxie sustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel AT wenqianxia sustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel AT bingao sustainabilityofstockpricefluctuationsexplanationfromarecursivedynamicmodel
_version_	1718374615614488576

The sustainability of stock price fluctuations: Explanation from a recursive dynamic model.

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