IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2505.09625.html
   My bibliography  Save this paper

Mechanisms of information communication and market price movements. The case of SP 500 market

Author

Listed:
  • Inga Ivanova
  • Grzegorz Rzadkowski

Abstract

In this paper we analyze how market prices change in response to information processing among the market participants and how non-linear information dynamics drive market price movement. We analyze historical data of the SP 500 market for the period 1950 -2025 using the logistic Continuous Wavelet Transformation method. This approach allows us to identify various patterns in market dynamics. These patterns are conceptualized using a new theory of reflexive communication of information in a market consisting of heterogeneous agents who assign meaning to information from different perspectives. This allows us to describe market dynamics and make forecasts of its development using the most general mechanisms of information circulation within the content-free approach.

Suggested Citation

  • Inga Ivanova & Grzegorz Rzadkowski, 2025. "Mechanisms of information communication and market price movements. The case of SP 500 market," Papers 2505.09625, arXiv.org.
    • Handle: RePEc:arx:papers:2505.09625
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2505.09625
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    2. Zhenya Yan, 2009. "Financial rogue waves," Papers 0911.4259, arXiv.org, revised Sep 2010.
    3. Sendhil Mullainathan & Jann Spiess, 2017. "Machine Learning: An Applied Econometric Approach," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 87-106, Spring.
    4. Pietro Murialdo & Linda Ponta & Anna Carbone, 2020. "Long-Range Dependence in Financial Markets: a Moving Average Cluster Entropy Approach," Papers 2004.14736, arXiv.org.
    5. de Nooy, Wouter & Leydesdorff, Loet, 2015. "The dynamics of triads in aggregated journal–journal citation relations: Specialty developments at the above-journal level," Journal of Informetrics, Elsevier, vol. 9(3), pages 542-554.
    6. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    7. Brunnermeier, Markus K. & Oehmke, Martin, 2013. "Bubbles, Financial Crises, and Systemic Risk," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1221-1288, Elsevier.
    8. Leydesdorff, Loet & Dolfsma, Wilfred & Van der Panne, Gerben, 2006. "Measuring the knowledge base of an economy in terms of triple-helix relations among 'technology, organization, and territory'," Research Policy, Elsevier, vol. 35(2), pages 181-199, March.
    9. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    10. Petersen, Alexander M. & Rotolo, Daniele & Leydesdorff, Loet, 2016. "A triple helix model of medical innovation: Supply, demand, and technological capabilities in terms of Medical Subject Headings," Research Policy, Elsevier, vol. 45(3), pages 666-681.
    11. Quanbo Zha & Gang Kou & Hengjie Zhang & Haiming Liang & Xia Chen & Cong-Cong Li & Yucheng Dong, 2020. "Opinion dynamics in finance and business: a literature review and research opportunities," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    12. William McGill, 1954. "Multivariate information transmission," Psychometrika, Springer;The Psychometric Society, vol. 19(2), pages 97-116, June.
    13. Inga Ivanova, 2024. "Communication of information in systems of heterogeneous agents and systems’ dynamics," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(6), pages 5377-5393, December.
    14. Ivanova, Inga A. & Leydesdorff, Loet, 2014. "Rotational symmetry and the transformation of innovation systems in a Triple Helix of university–industry–government relations," Technological Forecasting and Social Change, Elsevier, vol. 86(C), pages 143-156.
    15. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    16. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
    17. F. Benedetto & L. Mastroeni & P. Vellucci, 2021. "Modeling the flow of information between financial time-series by an entropy-based approach," Annals of Operations Research, Springer, vol. 299(1), pages 1235-1252, April.
    18. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
    19. LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-574, May.
    20. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186, Elsevier.
    21. Loet Leydesdorff & Inga A. Ivanova, 2014. "Mutual redundancies in interhuman communication systems: Steps toward a calculus of processing meaning," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 65(2), pages 386-399, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofism:2012_047 is not listed on IDEAS
    2. Taipalus, Katja, 2012. "Detecting asset price bubbles with time-series methods," Scientific Monographs, Bank of Finland, number 2012_047.
    3. Bradley Jones, 2015. "Asset Bubbles: Re-thinking Policy for the Age of Asset Management," IMF Working Papers 2015/027, International Monetary Fund.
    4. Andreas Fuster & Benjamin Hebert & David Laibson, 2012. "Natural Expectations, Macroeconomic Dynamics, and Asset Pricing," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 1-48.
    5. Ryohei Hisano & Didier Sornette & Takayuki Mizuno & Takaaki Ohnishi & Tsutomu Watanabe, 2013. "High Quality Topic Extraction from Business News Explains Abnormal Financial Market Volatility," PLOS ONE, Public Library of Science, vol. 8(6), pages 1-12, June.
    6. Dmitry Kulikov, 2012. "Testing for Rational Speculative Bubbles on the Estonian Stock Market," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 4(1).
    7. Beutel, Johannes & List, Sophia & von Schweinitz, Gregor, 2018. "An evaluation of early warning models for systemic banking crises: Does machine learning improve predictions?," Discussion Papers 48/2018, Deutsche Bundesbank.
    8. Riza Demirer & David Gabauer & Rangan Gupta & Joshua Nielsen, 2023. "Gold-to-Platinum Price Ratio and the Predictability of Bubbles in Financial Markets," Working Papers 202317, University of Pretoria, Department of Economics.
    9. Emile du Plessis & Ulrich Fritsche, 2025. "New forecasting methods for an old problem: Predicting 147 years of systemic financial crises," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 44(1), pages 3-40, January.
    10. Tortorice, Daniel L., 2018. "Equity return predictability, time varying volatility and learning about the permanence of shocks," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 315-343.
    11. Tyler Muir, 2017. "Financial Crises and Risk Premia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 765-809.
    12. repec:bap:eebook:02 is not listed on IDEAS
    13. Gupta, Rangan & Nielsen, Joshua & Pierdzioch, Christian, 2024. "Stock market bubbles and the realized volatility of oil price returns," Energy Economics, Elsevier, vol. 132(C).
    14. Akaki Tsomaia, 2021. "Asset bubbles, financial sector, and current challenges to regulatory framework," International Economics and Economic Policy, Springer, vol. 18(4), pages 901-925, October.
    15. Y. Lemp'eri`ere & C. Deremble & P. Seager & M. Potters & J. P. Bouchaud, 2014. "Two centuries of trend following," Papers 1404.3274, arXiv.org.
    16. Eric M. Leeper & James M. Nason, 2014. "Bringing Financial Stability into Monetary Policy," CAMA Working Papers 2014-72, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    17. Anjan V. Thakor, 2023. "Finance research: What are the new frontiers?," The Financial Review, Eastern Finance Association, vol. 58(3), pages 453-462, August.
    18. B. De Backer, 2018. "Does financial market volatility influence the real economy?," Economic Review, National Bank of Belgium, issue iv, pages 107-124, december.
    19. Christian Drescher & Bernhard Herz, 2016. "What determines simultaneous asset bubbles? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 48(1), pages 35-51, January.
    20. Bordo, M.D. & Meissner, C.M., 2016. "Fiscal and Financial Crises," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 355-412, Elsevier.
    21. Taipalus, Katja, 2012. "Detecting asset price bubbles with time-series methods," Bank of Finland Scientific Monographs, Bank of Finland, volume 0, number sm2012_047, December.
    22. repec:hig:wpaper:98sti2019 is not listed on IDEAS
    23. Lamperti, Francesco & Bosetti, Valentina & Roventini, Andrea & Tavoni, Massimo & Treibich, Tania, 2021. "Three green financial policies to address climate risks," Journal of Financial Stability, Elsevier, vol. 54(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2505.09625. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.