Investor Sentiment in the Financial Market with Small World Networks

This paper argues the dynamic evolution issue of investor sentiment based on the small world network theory, by reviewing the micro-mechanism of financial network. On the stochastic multi-agent platform of Nagurney´s financial market, it takes the relative wealth and habit formation utility functions as the motive mechanism of this network structure evolution. With the degree distributions, mean geodetic distance between vertex pairs, and clustering coefficient as the evolving criterion of this network structure, it describes the dynamic evolution attributes of investor sentiment. Results of simulation indicate that investor sentiment evolution process has significant robustness with the set motive mechanism.