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The Stock Market as a Game: An Agent Based Approach to Trading in Stocks

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  • Eric Engle

Abstract

Just as war is sometimes fallaciously represented as a zero sum game -- when in fact war is a negative sum game - stock market trading, a positive sum game over time, is often erroneously represented as a zero sum game. This is called the "zero sum fallacy" -- the erroneous belief that one trader in a stock market exchange can only improve their position provided some other trader's position deteriorates. However, a positive sum game in absolute terms can be recast as a zero sum game in relative terms. Similarly it appears that negative sum games in absolute terms have been recast as zero sum games in relative terms: otherwise, why would zero sum games be used to represent situations of war? Such recasting may have heuristic or pedagogic interest but recasting must be clearly explicited or risks generating confusion. Keywords: Game theory, stock trading and agent based AI.

Suggested Citation

  • Eric Engle, 2008. "The Stock Market as a Game: An Agent Based Approach to Trading in Stocks," Papers 0809.0448, arXiv.org.
    • Handle: RePEc:arx:papers:0809.0448
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    Cited by:

    1. Fatih Cavdur & Soundar Kumara, 2014. "Network mining: Applications to business data," Information Systems Frontiers, Springer, vol. 16(3), pages 473-490, July.
    2. Ghorbani, Yousef & Zhang, Steven E. & Bourdeau, Julie E. & Chipangamate, Nelson S. & Rose, Derek H. & Valodia, Imraan & Nwaila, Glen T., 2024. "The strategic role of lithium in the green energy transition: Towards an OPEC-style framework for green energy-mineral exporting countries (GEMEC)," Resources Policy, Elsevier, vol. 90(C).

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