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Information versus imitation in a real-time agent-based model of financial markets

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  • Alessio Emanuele Biondo

    (Università degli Studi di Catania)

Abstract

This paper presents an agent based model of a financial market with a real-time engine, whose operation replicates the official time schedule of Borsa Italiana S.p.A. Simulated time series are compared with empirical data at different time scales (ticks, 1 s, 1 min, 5 min) in order to check the compliance of the model with some stylized facts. The modeled market structure is a dynamic multiplex with two layers: the first one is a star network, whose hub is the market maker (i.e., the owner of the venue holding the order book), where transactions are executed; the second one is designed according to different topologies, representing social interactions, where investors decide their behavior according to informative flows. The effect of imitation on market stability is discussed and some policy implications are provided.

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  • Alessio Emanuele Biondo, 2020. "Information versus imitation in a real-time agent-based model of financial markets," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(3), pages 613-631, July.
    • Handle: RePEc:spr:jeicoo:v:15:y:2020:i:3:d:10.1007_s11403-019-00249-2
    DOI: 10.1007/s11403-019-00249-2
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    More about this item

    Keywords

    Order book; Imitation; Agent based models; Time series; Networks;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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