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Colored minority games

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  • Matteo Marsili
  • Maurizio Piai

Abstract

We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient and inefficient markets still persists even when agents trade on widely spread time-scales. We derive analytically the dependence of the critical threshold on the distribution of time-scales. We also address the issue of market efficiency as a function of frequency. In an inefficient market we find that the size of arbitrage opportunities is inversely proportional to the frequency of the events on which they occur. Greatest asymmetries in market outcomes are concentrated on the most rare events. The practical limits of the applications of these ideas to real markets are discussed in a specific example.

Suggested Citation

  • Matteo Marsili & Maurizio Piai, 2002. "Colored minority games," Papers cond-mat/0202479, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0202479
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    Cited by:

    1. Marcus Cordi & Serge Kassibrakis & Damien Challet, 2018. "The market nanostructure origin of asset price time reversal asymmetry," Working Papers hal-01966419, HAL.
    2. Marcus Cordi & Damien Challet & Serge Kassibrakis, 2021. "The market nanostructure origin of asset price time reversal asymmetry," Quantitative Finance, Taylor & Francis Journals, vol. 21(2), pages 295-304, February.
    3. Vee-Liem Saw & Lock Yue Chew, 2020. "No-boarding buses: Synchronisation for efficiency," PLOS ONE, Public Library of Science, vol. 15(3), pages 1-34, March.
    4. Lustosa, Bernardo C. & Cajueiro, Daniel O., 2010. "Constrained information minority game: How was the night at El Farol?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(6), pages 1230-1238.
    5. Mello, Bernardo A. & Cajueiro, Daniel O., 2008. "Minority games, diversity, cooperativity and the concept of intelligence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(2), pages 557-566.
    6. Crepaldi, Antonio F. & Neto, Camilo Rodrigues & Ferreira, Fernando F. & Francisco, Gerson, 2009. "Multifractal regime transition in a modified minority game model," Chaos, Solitons & Fractals, Elsevier, vol. 42(3), pages 1364-1371.

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