Skip to main content
SpringerLink
Log in

The value of information in a multi-agent market model

The luck of the uninformed

  • Interdisciplinary Physics
  • Published:
The European Physical Journal B Aims and scope Submit manuscript

Abstract.

We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic relationship of net returns of traders as a function of information levels, both in the experiments and in the simulations. Particularly, averagely informed traders perform worse than the non informed and only traders with high levels of information (insiders) are able to beat the market. The simulations and the experiments reproduce many stylized facts of tick-by-tick stock-exchange data, such as fast decay of autocorrelation of returns, volatility clustering and fat-tailed distribution of returns. These results have an important message for everyday life. They can give a possible explanation why, on average, professional fund managers perform worse than the market index.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • A. Cowles, Econometrica 1, 309 (1933)

    Article  Google Scholar 

  • M. Jensen, Journal of Finance 23, 389 (1968)

    Article  Google Scholar 

  • B.G. Malkiel, European Financial Management 9, 1 (2003)

    Article  Google Scholar 

  • B.G. Malkiel, Journal of Economic Perspectives 17, 59 (2003)

    Article  Google Scholar 

  • S.J. Grossman, J.E. Stiglitz, Ame. Econ. Rev. 70, 393 (1980)

    Google Scholar 

  • M. Hellwig, Journal of Economic Theory 26, 279 (1982)

    Article  MATH  MathSciNet  Google Scholar 

  • S. Figlewski, Journal of Finance 37, 87 (1982)

    Article  Google Scholar 

  • S. Sunder, Econometrica 60, 667 (1992)

    Article  MATH  Google Scholar 

  • E. Scalas, S. Cincotti, C. Dose, M. Raberto, Fraudulent Agents in an Artificial Financial Market, in Nonlinear Dynamics and Heterogeneous Interacting Agents, edited by T. Lux, S. Reitz, E. Samanidou, Lecture Notes in Economics and Mathematical Systems, 550, 317 (Springer, Berlin, 2005)

  • M. Kirchler, J. Huber, Journal of Economic Dynamics and Control, forthcoming

  • J. Huber, Journal of Economic Dynamics and Control, forthcoming

  • J. Huber, M. Kirchler, M. Sutter, Journal of Economic Behavior and Organization, forthcoming

  • J.D. Gibbons, Nonparametric Statistical Inference, 2nd edn. (M. Dekker, 1985)

  • M. Hollander, D.A. Wolfe, Nonpapametric Statistical Methods (Wiley, 1973)

  • R. Cont, Quantitative Finance 1, 223 (2001)

    Article  Google Scholar 

  • G.G. Judge, R.C. Hill, W.E. Griffiths, H. Lutkepohl, T.-C. Lee, Introduction to the Theory and Practice of Econometrics (New York, Wiley, 1988)

  • M. LiCalzi, P. Pellizzari, Quantitative Finance 3, 1 (2003)

    Article  MathSciNet  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. ISI Foundation, Viale S. Severo 65, 10133, Torino, Italy

    B. Tóth & E. Scalas

  2. Department of Theoretical Physics, Budapest University of Technology and Economics, Budafoki út. 8, 1111, Budapest, Hungary

    B. Tóth

  3. Dipartimento di Scienze e Tecnologie Avanzate, East Piedmont University, Via Cavour 84, 15100, Alessandria, Italy

    E. Scalas

  4. Yale School of Management, 135 Prospect Street, New Haven, CT, 06511, USA

    J. Huber

  5. Department of Banking and Finance, Universitaetsstrasse 15 A, Innsbruck University School of Management, 6020, Innsbruck, Austria

    J. Huber & M. Kirchler

Authors
  1. B. Tóth
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. E. Scalas
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. J. Huber
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. M. Kirchler
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to B. Tóth.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Tóth, B., Scalas, E., Huber, J. et al. The value of information in a multi-agent market model. Eur. Phys. J. B 55, 115–120 (2007). https://doi.org/10.1140/epjb/e2007-00046-2

Download citation

  • Received:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1140/epjb/e2007-00046-2

PACS.

Search

Navigation