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Trader Dynamics In A Model Market

Author

Listed:
  • NEIL F. JOHNSON

    (Physics Department, Oxford University, Parks Road, Oxford, OX1 3PU, UK)

  • MICHAEL HART

    (Physics Department, Oxford University, Parks Road, Oxford, OX1 3PU, UK)

  • PAK MING HUI

    (Department of Physics, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong, People's Republic of China)

  • DAFANG ZHENG

    (Department of Applied Physics, South China University of Technology, Guangzhou 510641, People's Republic of China)

Abstract

We explore various extensions of Challet and Zhang's Minority Game in an attempt to gain insight into the dynamics underlying financial markets. First we consider a heterogeneous population where individual traders employ differing "time horizons" when making predictions based on historical data. The resulting average winnings per trader is a highly non-linear function of the population's composition. Second, we introduce a threshold confidence level among traders below which they will not trade. This can give rise to large fluctuations in the "volume" of market participants and the resulting market "price".

Suggested Citation

  • Neil F. Johnson & Michael Hart & Pak Ming Hui & Dafang Zheng, 2000. "Trader Dynamics In A Model Market," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 443-450.
    • Handle: RePEc:wsi:ijtafx:v:03:y:2000:i:03:n:s0219024900000358
    DOI: 10.1142/S0219024900000358
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    Cited by:

    1. Elena Green & Daniel M. Heffernan, 2019. "An Agent-Based Model to Explain the Emergence of Stylised Facts in Log Returns," Papers 1901.05053, arXiv.org.
    2. Yong Shi & Bo Li & Guangle Du, 2021. "Pyramid scheme in stock market: a kind of financial market simulation," Papers 2102.02179, arXiv.org, revised Feb 2021.

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