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Market Moods and Network Dynamics of Stock Returns: The Bipolar Behavior

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  • Ali Irannezhad Ajirlou
  • Hamidreza Esmalifalak
  • Maryam Esmalifalak
  • Sahar Pordeli Behrouz
  • Farid Soltanalizadeh

Abstract

The authors show that a simple mood-separable preference in a network study of stock returns captures a variety of stylized facts regarding stocks’ provisional (ab)normal behavior. These behaviors are articulated in a multistate complete Euclidean network model that specifies the existence, direction, and magnitude of a self-organized dynamics for each individual stock during abnormal market moods. In the empirical setting, the authors apply suggested model along with 2 established visual approaches (multidimensional scaling and agglomerative hierarchical clustering) for benchmark purposes. Results reveal different levels of erratic return dynamics for each stock and the entire market in different abnormal market moods. The authors model and interpret these self-organized dynamics as evidence of stocks’ and market’s bipolar behavior.

Suggested Citation

  • Ali Irannezhad Ajirlou & Hamidreza Esmalifalak & Maryam Esmalifalak & Sahar Pordeli Behrouz & Farid Soltanalizadeh, 2019. "Market Moods and Network Dynamics of Stock Returns: The Bipolar Behavior," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 20(2), pages 239-254, April.
  • Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:2:p:239-254
    DOI: 10.1080/15427560.2018.1508022
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    Cited by:

    1. Mehmet Ali Balcı & Larissa M. Batrancea & Ömer Akgüller & Anca Nichita, 2022. "Coarse Graining on Financial Correlation Networks," Mathematics, MDPI, vol. 10(12), pages 1-16, June.
    2. Esmalifalak, Hamidreza, 2022. "Euclidean (dis)similarity in financial network analysis," Global Finance Journal, Elsevier, vol. 53(C).
    3. Paritosh Chandra Sinha, 2021. "Attention to the Election-Economics-Politics (EEP) Nexus in the Indian Stock Markets," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 13(1), pages 7-32, June.

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