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A controllable laboratory stock market for modeling real stock markets

  • Kenan An
  • Xiaohui Li
  • Guang Yang
  • Jiping HuangEmail author
Regular Article

Abstract

Based on the different research approaches, econophysics can be divided into three directions: empirical econophysics, computational econophysics, and experimental econophysics. Because empirical econophysics lacks controllability that is needed to study the impacts of different external conditions and computational econophysics has to adopt artificial decision-making processes that are often deviated from those of real humans, experimental econophysics tends to overcome these problems by offering controllability and using real humans in laboratory experiments. However, to our knowledge, the existing laboratory experiments have not convincingly reappeared the stylized facts (say, scaling) that have been revealed for real economic/financial markets by econophysicists. A most important reason is that in these experiments, discrete trading time makes these laboratory markets deviated from real markets where trading time is naturally continuous. Here we attempt to overcome this problem by designing a continuous double-auction stock-trading market and conducting several human experiments in laboratory. As an initial work, the present artificial financial market can reproduce some stylized facts related to clustering and scaling. Also, it predicts some other scaling in human behavior dynamics that is hard to achieve in real markets due to the difficulty in getting the data. Thus, it becomes possible to study real stock markets by conducting controlled experiments on such laboratory stock markets producing high frequency data.

Keywords

Statistical and Nonlinear Physics 

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Copyright information

© EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Kenan An
    • 1
  • Xiaohui Li
    • 1
  • Guang Yang
    • 1
  • Jiping Huang
    • 1
    Email author
  1. 1.Department of Physics and State Key Laboratory of Surface PhysicsFudan UniversityShanghaiP.R. China

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