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Trading on Marginal Information

  • Florian HauserEmail author
  • Bob Kaempff
Conference paper
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 645)

Abstract

We present an agent-based simulation of a financial market with heterogeneously informed agents based on a model proposed by Schredelseker (2001). By introducing a modified fundamental trading strategy we extend the model and show that this strategy is a superior choice for most agents in the market. The modified fundamental strategy is characterized by giving more weight to the marginal piece of information an agent receives. We show that this protects agents from making joint mistakes with other market participants and suffering from a herding effect. We also observe that informational efficiency of market prices increases when agents adopt the modified trading strategy.

Keywords

Market Price Trading Strategy Risky Asset Reservation Price Marginal Signal 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Berlin Heidelberg 2010

Authors and Affiliations

  1. 1.Department of Banking and FinanceInnsbruck University School of ManagementInnsbruckAustria

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