The 2008 crisis from the neurofinance perspective: the case of Bovespa

Rocha, Armando F.; Lima Filho, Roberto Ivo Da Rocha; Augustus, Heitor; Lima, Igor Ribeiro
December 2011
NeuroPsychoEconomics Conference Proceedings;2011, p17
Conference Proceeding
The world is still facing a financial crisis, which started in mid 2007 and up to now is far from being solved. Stock markets around the world reacted badly and the real time news has never played such an important role to investors as seen in previous crisis. In other words, the impact of the media deepened the bear dynamics of the markets, that is, it amplified the volatility of it. Neuroeconomics is a new field of inquiring that has the purpose of studying decision making taking into consideration the role played by emotion. Here, we use these notions to develop a neuroeconomic modelling of the Brazilian stock market that assumes that the investor's humor is dependent on the market sentiment, which in turn is sensitive to the kind of news delivered by the media. We used this model to study the Bovespa index (IBOV) evolution from January, 2003 to September, 2010 and correlated the market sentiment to an index of Good/Bad news about IBOV. The outcome shows that market sentiment depends of the news direction, that is, good and bad news, and directly influences stock market indices.


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