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Computational and Mathematical Organization Theory

, Volume 24, Issue 3, pp 308–350 | Cite as

Using realistic trading strategies in an agent-based stock market model

Manuscript

Abstract

The use of agent-based models (ABMs) has increased in the last years to simulate social systems and, in particular, financial markets. ABMs of financial markets are usually validated by checking the ability of the model to reproduce a set of empirical stylised facts. However, other common-sense evidence is available which is often not taken into account, ending with models which are valid but not sensible. In this paper we present an ABM of a stock market which incorporates this type of common-sense evidence and implements realistic trading strategies based on practitioners literature. We next validate the model using a comprehensive approach consisting of four steps: assessment of face validity, sensitivity analysis, calibration and validation of model outputs.

Keywords

Agent-based simulation Validation Calibration Stylised facts Technical trading 

JEL Classification

C63 G1 G20 G11 

Notes

Acknowledgements

We would like to thank the anonymous reviewers for their insightful and constructive comments.

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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  1. 1.Centre Internacional de Mètodes Numèrics en Enginyeria (CIMNE)BarcelonaSpain
  2. 2.Department for Economic, Financial, and Actuarial Mathematics, Faculty of Economics and BusinessUniversity of BarcelonaBarcelonaSpain

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