Relationship between investor sentiment and stock indices fluctuation based on EEMD

LI He-long, FENG Chun-e

Systems Engineering - Theory & Practice ›› 2014, Vol. 34 ›› Issue (10) : 2495-2503.

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Systems Engineering - Theory & Practice ›› 2014, Vol. 34 ›› Issue (10) : 2495-2503. DOI: 10.12011/1000-6788(2014)10-2495

Relationship between investor sentiment and stock indices fluctuation based on EEMD

  • LI He-long, FENG Chun-e
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Abstract

Based on the effectiveness of ensemble empirical mode decomposition (EEMD), we deal with nonlinear and non-stationary financial time series. EEMD is applied to decompose the sequences of investor sentiment and stock indices into several independent intrinsic mode functions (IMF) with different scales and a residual term, to extract the fluctuation characteristics in different time scales of the sequences. And then we reorganize them to three parts: High frequency represents the short-term market fluctuations, low frequency by major events, and long-term trend. Further combined with econometric models, we analyze the fluctuations between investor sentiment and stock indices in different time scales. The empirical results show that the fluctuation relationship between investor sentiment and stock indices in different time scales is significantly different: in short-term, it's a two-way influence; in the medium-term, investor sentiment is ahead of stock indices' fluctuation and in the long-term, it's reverse.

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investor sentiment / stock indices / EEMD / fluctuation

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LI He-long , FENG Chun-e. Relationship between investor sentiment and stock indices fluctuation based on EEMD. Systems Engineering - Theory & Practice, 2014, 34(10): 2495-2503 https://doi.org/10.12011/1000-6788(2014)10-2495

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