Advances in Artificial Economics pp 3-15
Heterogeneous Beliefs Under Different Market Architectures
The paper analyzes the dynamics in a model with heterogeneous agents trading in simple markets under different trading protocols. Starting with the analytically tractable model of , we build a simulation platform with the aim to investigate the impact of the trading rules on the agents’ ecology and aggregate time series properties. The key behavioral feature of the model is the presence of a finite set of simple beliefs which agents choose each time step according to a fitness measure. The price is determined endogenously and our focus is on the role of the structural assumption about the market architecture. Analyzing dynamics under such different trading protocols as the Walrasian auction, the batch auction and the ‘order-book’ mechanism, we find that the resulting time series are similar to those originating from the noisy version of the model . We distinguish the randomness caused by a finite number of agents and the randomness induced by an order-based mechanisms and analyze their impact on the model dynamics.
Unable to display preview. Download preview PDF.
- Arthur WB, Holland JH, LeBaron B, Palmer R, Tayler P (1997) Asset pricing under endogenous expectations in an artificial stock market. In: Arthur WB, Durlauf SN, Lane D (eds) The economy as an evolving complex system II: 15–44. Addison-WesleyGoogle Scholar
- Brock WA (1997) Asset price behavior in complex environments. In: Arthur WB, Durlauf SN, Lane DA (eds) The economy as an evolving complex system II: 385–423. Addison-WesleyGoogle Scholar
- Gaunersdorfer A, Hommes CH (2005) A nonlinear structural model for volatility clustering. In: Teyssière G, Kirman A (eds) Long Memory in Economics: 265–288. SpringerGoogle Scholar
- Hommes CH (2006) Heterogeneous agent models in economics and finance. In: Judd K, Tesfatsion L (eds) Handbook of Computational Economics II: Agent-Based Computational Economics. Elsevier, North-HollandGoogle Scholar
- LeBaron B (2006) Agent-based computational finance. In: Judd K, Tesfatsion L (eds) Handbook of Computational Economics II: Agent-Based Computational Economics. Elsevier, North-HollandGoogle Scholar
- Levy M, Levy H and Solomon S (2000) Microscopic simulation of financial markets. Academic Press, LondonGoogle Scholar