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Development of an agent-based speculation game for higher reproducibility of financial stylized facts

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  • Katahira, Kei
  • Chen, Yu
  • Hashimoto, Gaku
  • Okuda, Hiroshi

Abstract

Simultaneous reproduction of all financial stylized facts is so difficult that most existing stochastic process-based and agent-based models are unable to achieve the goal. In this study, by extending the decision-making structure of Minority Game, we propose a novel agent-based model called “Speculation Game,” for better reproducibility of the stylized facts. The new model has three distinct characteristics comparing with preceding agent-based adaptive models for the financial market: the enabling of nonuniform holding and idling periods, the inclusion of magnitude information of price change in history, and the implementation of a cognitive world for the evaluation of investment strategies with capital gains and losses. With these features, Speculation Game succeeds in reproducing 10 out of the currently well studied 11 stylized facts under a single parameter setting.

Suggested Citation

  • Katahira, Kei & Chen, Yu & Hashimoto, Gaku & Okuda, Hiroshi, 2019. "Development of an agent-based speculation game for higher reproducibility of financial stylized facts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 503-518.
    • Handle: RePEc:eee:phsmap:v:524:y:2019:i:c:p:503-518
    DOI: 10.1016/j.physa.2019.04.157
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    Cited by:

    1. Kei Katahira & Yu Chen, 2019. "Heterogeneous wealth distribution, round-trip trading and the emergence of volatility clustering in Speculation Game," Papers 1909.03185, arXiv.org.
    2. Katahira, Kei & Chen, Yu & Akiyama, Eizo, 2021. "Self-organized Speculation Game for the spontaneous emergence of financial stylized facts," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 582(C).
    3. Kei Katahira & Yu Chen, 2019. "An extended Speculation Game for the recovery of Hurst exponent of financial time series," Papers 1909.02899, arXiv.org.

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