Applications of multi-variate Hawkes process to joint modelling of sentiment and market return events

Yang, Steve Y., Liu, Anqi ORCID: https://orcid.org/0000-0002-9224-084X, Chen, Jing ORCID: https://orcid.org/0000-0001-7135-2116 and Hawkes, Alan G. 2018. Applications of multi-variate Hawkes process to joint modelling of sentiment and market return events. Quantitative Finance 18 (2) , pp. 295-310. 10.1080/14697688.2017.1403156

Preview

PDF - Accepted Post-Print Version Download (1MB) | Preview

Abstract

To investigate the complex interactions between market events and investor sentiment, we employ a multivariate Hawkes process to evaluate dynamic effects among four types of distinct events: positive returns, negative returns, positive sentiment and negative sentiment. Using both intraday S&P 500 return data and Thomson Reuters News sentiment data from 2008 to 2014, we find: a) self-excitation is strong for all four types of events at 15 minutes time scale; b) there is a significant mutual-excitation between positive returns and positive sentiment, and negative returns and negative sentiment; c) decay of return events is almost twice as fast as sentiment events, which means market prices move faster than investor sentiment changes; d) positive sentiment shocks tend to generate negative price jumps; and e) the cross- excitation between positive and negative sentiments is stronger than their self-excitation. These findings provide further understanding of investor sentiment and its intricate interactions with market returns.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Mathematics
Subjects:	H Social Sciences > HG Finance Q Science > QA Mathematics
Additional Information:	Special Issue on ‘Hawkes Processes in Finance’
Publisher:	Taylor & Francis (Routledge)
ISSN:	1469-7688
Date of First Compliant Deposit:	14 December 2017
Date of Acceptance:	1 November 2017
Last Modified:	27 Nov 2024 17:00
URI:	https://orca.cardiff.ac.uk/id/eprint/107353

Citation Data

Cited 12 times in Scopus. View in Scopus. Powered By Scopus® Data

Actions (repository staff only)

Edit Item