Interaction of agents in financial markets and informational method to quantify it
- 35 Downloads
In this article, an informational method to quantify behavioral similarities of market participants is proposed regarding a financial market as a many-body system. An agent-based model of a financial market in which N market participants deal with M financial commodities is considered. In order to measure the agents’ interactions, the spectral distance defined by the Kullback-Leibler divergence between two normalized spectra of behavioral frequencies is introduced. The validity of the method is evaluated by using the behavioral frequencies obtained from the agent-based model. It is concluded that the perception and decision parameters of agents who treat two commodities tend to be similar when the behavioral frequencies are similar.
Key wordsAgent-based modeling Kullback-Leibler divergence Behavioral frequencies
Unable to display preview. Download preview PDF.
- 2.Aoki M (1996) New approaches to macroeconomic modeling: evolutionary stochastic dynamics, multiple equilibria, and externalities as field effects. Cambridge University Press, New YorkGoogle Scholar
- 3.Dacorogna MM, Gençay R, Müuller U et al. (2000) An introduction to high-frequency finance. Academic Press, San DiegoGoogle Scholar
- 4.Sato A-H (2006) Quantifying similarity between markets with application to high-frequency financial data. Phys Soc Jpn 75:084005-1–084005-5Google Scholar
- 7.CcCauley JL (2004) Dynamics of markets. Cambridge University Press, CambridgeGoogle Scholar