Abstract
In this paper, we study the agent modelling in an artificial stock market. In an artificial stock market, we consider two broad types of agents, “rational traders” and “imitators”. Rational traders trade to optimize their short-term profit and imitators invest based on the trend follow strategy. We examine how the coexistence of rational and irrational traders affect stock prices and their long run performance. We show the performances of these traders depend on their ratio in the market. In the region where rational traders are in the minority, they can come to win the market, in that they eventually have a high share of wealth. On the other hand, in the region where rational traders are in the majority, imitators can come to win the market. We conclude that the survival in a finance market is a kind of the minority game, and mimic traders (noise traders) might survive and come to win.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
