Applications of the Investor Sentiment Polarization Model in Sudden Financial Events

Abstract

At present, the proportion of individual financial investors in China is relatively high, the phenomenon of noisy trading is frequent, and the market system risk caused by the polarization of investor sentiment cannot be ignored. Therefore, exploring the polarization of investor sentiment under the influence of sudden financial events is of great practical significance for alleviating abnormal fluctuations in financial markets and building a long-term and stable market mechanism. Based on the B–A scale-free network and J–A model, this paper combines the multi-agent system and the DSSW model to construct a polarization model of investor sentiment. Through simulation tests and empirical tests, it is concluded that the polarization of investor sentiment stems from the herd effect and exclusion effect of investor behavior, and that increasing the coefficient of destabilization ε and reducing the effect interval threshold D1 and D2 will aggravate the polarization of investor sentiment in the equilibrium state, while increasing the effect parameter α and β will not affect the polarization of investor sentiment in the equilibrium state, but will accelerate the number of interactions required to reach the equilibrium state. Finally, this paper puts forward targeted policy recommendations to provide references for responding to unexpected financial events.