A. Duran and G. Caginalp (USA)
Data mining, overreaction, computational ﬁnance software,
ﬁnancial markets, and bubble.
We study overreaction and the cumulative effect of the con
secutive local overreaction patterns in ﬁnancial markets.
The ”overreaction diamond” pattern  is one of the key
components of a ﬁnancial market bubble. The cumulative
effect of the consecutive short term overreactions arising
from the deviation of stock prices from their fundamentals
can be explained by attribution theory, feedback traders,
affect and representativeness theories, and reference points
in investments. We study large set of ﬁnancial data and
propose a data mining method by exploiting the relative
cumulative sentiment of the investors. This leads to a po
tential for the implementation of suitable algorithms and
the preparation of software packages that can be useful for
prediction of various stages of overreaction and bubbles.