2019/06/07 by M. Feiler, Matthias Feiler, Feiler, Matthias +2
Decision Sciences · Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #General Finance (q-fin.GN) #Mathematical Finance (q-fin.MF) #Stock Market Forecasting Methods #q-fin.GN #q-fin.MF
paper · pdf · doi:10.48550/arxiv.1906.03201
16 pages, V2: added examples, results unchanged
openalex publication_date 2019/06/07 · arxiv created 2019/08/17 · arxiv updated 2019/08/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their opinions on the validity of that model. This leads to a well--known circular situation characteristic of financial markets, where participants collectively create the future they wish to estimate. In this paper, we introduce a framework for organizing multiple expectation models and study the conditions under which they are adopted by a majority of market participants.