IDEAS home Printed from https://ideas.repec.org/p/arx/papers/physics-0608091.html
   My bibliography  Save this paper

Anomalous fluctuations in Minority Games and related multi-agent models of financial markets

Author

Listed:
  • Tobias Galla
  • Giancarlo Mosetti
  • Yi-Cheng Zhang

Abstract

We review the recent approaches to modelling financial markets based on multi-agent systems. After a brief summary of the basic stylised facts observed in real-market time-series we discuss some simple agent-based systems which are currently used to model financial markets. One of the most prominent examples is here the Minority Game (MG), which we address in some more detail. After a brief discussion of its basic setup and general phenomenology we summarise the main findings of the statistical mechanics analysis and discuss the emergence of stylised facts in extensions of the MG near their phase transitions between efficient and predictable regimes. We then turn towards more realistic variants which comprise heterogeneous populations of agents, with different memory capabilities, different inclinations to trade and varying expectations on the future evolution of the market. Finally we give a short outlook on potential future work in this area.

Suggested Citation

  • Tobias Galla & Giancarlo Mosetti & Yi-Cheng Zhang, 2006. "Anomalous fluctuations in Minority Games and related multi-agent models of financial markets," Papers physics/0608091, arXiv.org.
    • Handle: RePEc:arx:papers:physics/0608091
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/physics/0608091
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
    2. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, University Library of Munich, Germany, revised 15 Aug 2002.
    3. Tesfatsion, Leigh & Judd, Kenneth L., 2006. "Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics," Staff General Research Papers Archive 10368, Iowa State University, Department of Economics.
    4. Challet, Damien & Marsili, Matteo & Zhang, Yi-Cheng, 2013. "Minority Games: Interacting agents in financial markets," OUP Catalogue, Oxford University Press, number 9780199686698.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea De Martino & Tobias Galla, 2011. "On Non-Ergodic Phases In Minority Games," New Mathematics and Natural Computation (NMNC), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 249-265.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Westerhoff Frank H., 2008. "The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(2-3), pages 195-227, April.
    2. Paul L. Borrill & Leigh Tesfatsion, 2011. "Agent-based Modeling: The Right Mathematics for the Social Sciences?," Chapters, in: John B. Davis & D. Wade Hands (ed.), The Elgar Companion to Recent Economic Methodology, chapter 11, Edward Elgar Publishing.
    3. Juan Manuel Larrosa, 2016. "Agentes computacionales y análisis económico," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 18(34), pages 87-113, January-J.
    4. Sensfuß, Frank & Ragwitz, Mario & Genoese, Massimo & Möst, Dominik, 2007. "Agent-based simulation of electricity markets: a literature review," Working Papers "Sustainability and Innovation" S5/2007, Fraunhofer Institute for Systems and Innovation Research (ISI).
    5. Frijns, Bart & Lehnert, Thorsten & Zwinkels, Remco C.J., 2010. "Behavioral heterogeneity in the option market," Journal of Economic Dynamics and Control, Elsevier, vol. 34(11), pages 2273-2287, November.
    6. Junjie Sun & Leigh Tesfatsion, 2007. "Dynamic Testing of Wholesale Power Market Designs: An Open-Source Agent-Based Framework," Computational Economics, Springer;Society for Computational Economics, vol. 30(3), pages 291-327, October.
    7. Alan Mehlenbacher, 2007. "Multiagent System Simulations of Sealed-Bid Auctions with Two-Dimensional Value Signals," Department Discussion Papers 0707, Department of Economics, University of Victoria.
    8. Wolff, Christian & Verschoor, Willem F C & Jongen, Ron & Zwinkels, Remco C.J., 2008. "Dispersion of Beliefs in the Foreign Exchange Market," CEPR Discussion Papers 6738, C.E.P.R. Discussion Papers.
    9. Sheri Markose, 2006. "Developments in experimental and agent-based computational economics (ACE): overview," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 1(2), pages 119-127, November.
    10. Rodolphe Buda, 2008. "Two Dimensional Aggregation Procedure: An Alternative to the Matrix Algebraic Algorithm," Computational Economics, Springer;Society for Computational Economics, vol. 31(4), pages 397-408, May.
    11. Domenico Gatti & Edoardo Gaffeo & Mauro Gallegati, 2010. "Complex agent-based macroeconomics: a manifesto for a new paradigm," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 5(2), pages 111-135, December.
    12. G. Fagiolo & A. Roventini, 2009. "On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    13. Li, Hongyan & Sun, Junjie & Tesfatsion, Leigh, 2010. "Testing Institutional Arrangements Via Agent-Based Modeling: A U.S. Electricity Market Example," Staff General Research Papers Archive 13155, Iowa State University, Department of Economics.
    14. Alan Mehlenbacher, 2007. "Multiagent System Platform for Auction Simulations," Department Discussion Papers 0706, Department of Economics, University of Victoria.
    15. G. Fagiolo & C. Birchenhall & P. Windrum, 2007. "Empirical Validation in Agent-based Models: Introduction to the Special Issue," Computational Economics, Springer;Society for Computational Economics, vol. 30(3), pages 189-194, October.
    16. Karolina Safarzyńska & Jeroen Bergh, 2010. "Evolutionary models in economics: a survey of methods and building blocks," Journal of Evolutionary Economics, Springer, vol. 20(3), pages 329-373, June.
    17. Jack Robles, 2008. "Evolution, bargaining, and time preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(1), pages 19-36, April.
    18. Carl Chiarella & Roberto Dieci & Xue-Zhong He, 2013. "Time-varying beta: a boundedly rational equilibrium approach," Journal of Evolutionary Economics, Springer, vol. 23(3), pages 609-639, July.
    19. Andreas Fuster & Benjamin Hebert & David Laibson, 2012. "Natural Expectations, Macroeconomic Dynamics, and Asset Pricing," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 1-48.
    20. Alexander Smajgl, 2007. "Modelling evolving rules for the use of common-pool resources in an agent-based model," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 5(2), pages 56-80.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:physics/0608091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.