Abstract
Quantitative finance has had a long tradition of a bottom-up approach to complex systems inference via multi-agent systems (MAS). These statistical tools are based on modelling agents trading via a centralised order book, in order to emulate complex and diverse market phenomena. These past financial models have all relied on so-called zero-intelligence agents, so that the crucial issues of agent information and learning, central to price formation and hence to all market activity, could not be properly assessed. In order to address this, we designed a next-generation MAS stock market simulator, in which each agent learns to trade autonomously via reinforcement learning. We calibrate the model to real market data from the London Stock Exchange over the years 2007 to 2018, and show that it can faithfully reproduce key market microstructure metrics, such as various price autocorrelation scalars over multiple time intervals. Agent learning thus enables accurate emulation of the market microstructure as an emergent property of the MAS.
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Notes
Computations were performed on a Mac Pro with 3,5 GHz 6-Core Intel Xeon E5 processor, and 16 GB 1866 MHz DDR memory.
We used the time series feature extraction functions implemented in the tsfresh Python package (Christ et al. 2018).
We used the implementation from the scikit-learn Python package (Pedregosa et al. 2011), with 200 estimators, maximal tree depth equal to 5 and default values for other hyperparameters.
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Acknowledgements
We graciously acknowledge this work was supported by the RFFI Grant No. 16-51-150007 and CNRS PRC No. 151199, and received support from FrontCog ANR-17-EURE-0017. I. L.’s work was supported by the Russian Science Foundation, Grant No. 18-11-00294. S. B.-G. received funding within the framework of the HSE University Basic Research Program funded by the Russian Academic Excellence Project No. 5-100.
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Appendix
Appendix
1.1 Classification Accuracy
We show on Fig. 16 the accuracy of both the testing (left) and training (right) sets, as functions of time-series sample size, for samples containing larger numbers of timestamps than in the Fig. 13. The saturating accuracy dynamics can be observed for both testing and training sets: for the value distribution feature set, the former does not exceed \(70\%\) and the latter \(75\%\), while for the full time-series feature set, the former saturates above \(90\%\) and the latter above \(95\%\). One can notice that the accuracy values on the training set are generally higher than for the testing set, and do not show such a pronounced saturation dynamic. The accuracy on the training set is not too large because the trees in the random forest have been regularized (with maximal depth equal to 5), since we found it is necessary for a good generalization on the testing set.
1.2 Top Statistical Features
We provide a general grouping and examples of the top statistical features used in the dimensionality reduction performed in Sect. 4.2. The exact ranking of particular features found in our experiments together with their importance metric value \(\varTheta\) is as follows. The imporance metric \(\varTheta\) is summed from 30 random forest models trained on different random splits of the training/testing sets.
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Partial autocorrelation value of lag 1, \(\varTheta =1.2240\).
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First coefficient of the fitted AR(10) process, \(\varTheta =1.0777\).
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Kurtosis of the FFT coefficient distribution, \(\varTheta =1.0214\).
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Skewness of the FFT coefficient distribution, \(\varTheta =1.0001\).
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Autocorrelation value of lag 1, \(\varTheta =0.9861\).
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60th percentile of the value distribution, \(\varTheta =0.9044\).
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Kurtosis of the FFT coefficient distribution, \(\varTheta =0.7347\).
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Mean of consecutive changes in the series for values in between the 0th and the 80th percentiles of the value distribution, \(\varTheta =0.6349\).
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9.
Variance of consecutive changes in the series for values in between the 0th and the 20th percentiles of the value distribution, \(\varTheta =0.5948\).
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Approximate entropy value (length of compared run of data is 2, filtering level is 0.1), \(\varTheta =0.5878\).
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70th percentile of the value distribution, \(\varTheta =0.5589\).
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Variance of absolute consecutive changes in the series for values in between the 0th and the 20th percentiles of the value distribution, \(\varTheta =0.5584\).
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Mean of consecutive changes in the series for values in between the 40th and the 100th percentiles of the value distribution, \(\varTheta =0.4755\).
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Ratio of values that are more than 1 standard deviation away from the mean value, \(\varTheta =0.3282\).
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Median of the value distribution, \(\varTheta =0.2957\).
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Skewness of the value distribution, \(\varTheta =0.2894\).
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Measure of time series nonlinearity from Schreiber and Schmitz (1997) of lag 1, \(\varTheta =0.2867\).
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Second coefficient of the fitted AR(10) process, \(\varTheta =0.2726\).
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Partial autocorrelation value of lag 1, \(\varTheta =0.2575\).
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Time reversal symmetry statistic from Fulcher and Jones (2014) of lag 1, \(\varTheta =0.2418\).
The top-10 features referenced in Sect. 4.2 are the first 10 features taken from the list above. The PCA and UMAP mappings of the top-10 features onto a two-dimensional space demonstrated some separability between the two classes (real vs. simulated data), as measured by training a linear classifier on these two-dimensional data representations (see Sect. 4.2 for details), as well as by calculating the Kolmogorov–Smirnov (KS) statistic for each embedding component. The KS statistic value between the two classes is 0.24 and 0.11 for PCA (for the first and second component, respectively) and 0.30 and 0.25 for UMAP.
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Lussange, J., Lazarevich, I., Bourgeois-Gironde, S. et al. Modelling Stock Markets by Multi-agent Reinforcement Learning. Comput Econ 57, 113–147 (2021). https://doi.org/10.1007/s10614-020-10038-w
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DOI: https://doi.org/10.1007/s10614-020-10038-w