A sentiment-based modeling and analysis of stock price during the COVID-19: U- and Swoosh-shaped recovery

Abstract

Recently, a stock price model is proposed by A. Mahata et al. [Physica A, 574, 126008 (2021)] to understand the effect of COVID-19 on stock market. It describes V- and L-shaped recovery of the stocks and indices, but fails to simulate the U- and Swoosh-shaped recovery that arises due to sharp crisis and prolong drop followed by quick recovery (U-shaped) or slow recovery for longer period (Swoosh-shaped recovery). We propose a modified model by introducing a new variable $\theta$ that quantifies the sentiment of the investors. $\theta =+1,0,-1$ for positive, neutral and negative sentiment, respectively. The model explains the movement of sectoral indices with positive $\varphi$ showing U- and Swoosh-shaped recovery. The simulation using synthetic fund-flow (${\Psi }_{st}$) with different shock lengths ($T_S$), $\varphi$, negative sentiment period ($T_N$) and portion of fund-flow ($\lambda$) during recovery period show U- and Swoosh-shaped recovery. The results show that the recovery of the indices with positive $\varphi$ becomes very weak with the extended $T_S$ and $T_N$. The stocks with higher $\varphi$ and $\lambda$ recover quickly. The simulation of the Nifty Bank, Nifty Financial and Nifty Realty show U-shaped recovery and Nifty IT shows Swoosh-shaped recovery. The simulation result is consistent with the real stock price movement. The time-scale ($\tau$) of the shock and recovery of these indices during the COVID-19 are consistent with the time duration of the change of negative sentiment from the onset of the COVID-19. This study may help the investors to plan their investment during different crises.

References in corpus (1)

• Modeling and analysis of the effect of COVID-19 on the stock price: V and L-shape recovery

Cited by in corpus (1)

• Detection and Forecasting of Extreme event in Stock Price Triggered by Fundamental, Technical, and External Factors