Stock Market Simulation

Abstract

The stock exchange market typically responds to socio-economic conditions. The active participation of key market players undoubtedly creates liquidity in the market. There are other factors that influence variations in the market besides the large transactions that key market players make. For instance, markets react to news of social events, economic events, natural disasters, pandemics, etc. In certain conditions, the effects of those events drive price movement drastically. Systematic investors need to prepare for future occurrences to preserve capital by learning from near-real-life conditions. If you inspect industries that involve considerable risk, for example, aerospace and defense, you will notice that the subjects learn through simulation. Simulation is a method that involves generating conditions that mimic the actual world so that subjects know how to act and react in a condition similar to preceding ones. In finance, we deal with large funds. They habitually take risk into account when experimenting and testing models.