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Network formation in a multi-asset artificial stock market

Author

Listed:
  • Songtao Wu

    (School of Economics and Management, Southeast University)

  • Jianmin He

    (School of Economics and Management, Southeast University)

  • Shouwei Li

    (School of Economics and Management, Southeast University)

  • Chao Wang

    (School of Economics and Management, Southeast University)

Abstract

A multi-asset artificial stock market is developed. In the market, stocks are assigned to a number of sectors and traded by heterogeneous investors. The mechanism of continuous double auction is employed to clear order book and form daily closed prices. Simulation results of prices at the sector level show an intra-sector similarity and inter-sector distinctiveness, and returns of individual stocks have stylized facts that are ubiquitous in the real-world stock market. We find that the market risk factor has critical impact on both network topology transition and connection formation, and that sector risk factors account for the formation of intra-sector links and sector-based local interaction. In addition, the number of community in threshold-based networks is correlated negatively and positively with the value of correlation coefficients and the ratio of intra-sector links, which are respectively determined by intensity of sector risk factors and the number of sectors.

Suggested Citation

  • Songtao Wu & Jianmin He & Shouwei Li & Chao Wang, 2018. "Network formation in a multi-asset artificial stock market," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 91(4), pages 1-10, April.
    • Handle: RePEc:spr:eurphb:v:91:y:2018:i:4:d:10.1140_epjb_e2018-80384-6
    DOI: 10.1140/epjb/e2018-80384-6
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    References listed on IDEAS

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    1. Chiarella, Carl & Dieci, Roberto & He, Xue-Zhong, 2007. "Heterogeneous expectations and speculative behavior in a dynamic multi-asset framework," Journal of Economic Behavior & Organization, Elsevier, vol. 62(3), pages 408-427, March.
    2. Chiarella, Carl & Iori, Giulia, 2009. "The impact of heterogeneous trading rules on the limit order book and order flows," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 525-537.
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    Cited by:

    1. Pang, Raymond Ka-Kay & Granados, Oscar M. & Chhajer, Harsh & Legara, Erika Fille T., 2021. "An analysis of network filtering methods to sovereign bond yields during COVID-19," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    2. Raymond Ka-Kay Pang & Oscar Granados & Harsh Chhajer & Erika Fille Legara, 2020. "An analysis of network filtering methods to sovereign bond yields during COVID-19," Papers 2009.13390, arXiv.org, revised Feb 2021.

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