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Waiting Times In Simulated Stock Markets

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  • ALESSANDRO N. CAPPELLINI

    ()
    (ISI Foundation, Corso Settimio Severo 65, Torino, Italy)

  • GIANLUIGI FERRARIS

    ()
    (University of Torino, Corso Unione Sovietica 218, Torino, Italy)

Abstract

Exploiting a precise reproduction of a stock exchange, the robustness of the continuous double auction (CDA) mechanism, evaluated by means of the waiting time distributions, has been proved versus 36 different setups made by varying both the operators' behavior and the market micro structure. The obtained results demonstrate that the CDA remains able to clear strongly different order flows, although the Milan stock exchange seemed to be a little more efficient than the NYSE under the allocative point of view, evidencing the intrinsic complexity of the stock market. The simulation has been built as an agent-based model in order to obtain a plausible order flow. The decisions of single agents and their interaction through the market book are realistic and reproduce some empirical analysis results. The mentioned results have been obtained either by the analysis of the complete pending time series or the same computation of the asks and bids series alone.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Advances in Complex Systems.

Volume (Year): 12 (2009)
Issue (Month): 02 ()
Pages: 195-206

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Handle: RePEc:wsi:acsxxx:v:12:y:2009:i:02:p:195-206

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Keywords: Waiting times; agent-based modeling; stock market; micro structures; market architectures;

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  1. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Paolo Pellizzari & Arianna Dal Forno, 2006. "A comparison of different trading protocols in an agent-based market," Working Papers 140, Department of Applied Mathematics, Università Ca' Foscari Venezia.
  3. Challet, Damien & Stinchcombe, Robin, 2001. "Analyzing and modeling 1+1d markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 300(1), pages 285-299.
  4. Marco LiCalzi & Paolo Pellizzari, 2006. "The allocative effectiveness of market protocols under intelligent trading," Working Papers 134, Department of Applied Mathematics, Università Ca' Foscari Venezia.
  5. Enrico Scalas & Taisei Kaizoji & Michael Kirchler & Juergen Huber & Alessandra Tedeschi, 2006. "Waiting times between orders and trades in double-auction markets," Papers physics/0608273, arXiv.org.
  6. Bottazzi, Giulio & Dosi, Giovanni & Rebesco, Igor, 2005. "Institutional architectures and behavioral ecologies in the dynamics of financial markets," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 197-228, February.
  7. Pietro Terna, 2000. "Sum: A Surprising (Un)Realistic Market - Building A Simple Stock Market Structure With Swarm," Computing in Economics and Finance 2000 173, Society for Computational Economics.
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