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Information Dissemination and Aggregation in Asset Markets with Simple Intelligent Traders

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Author Info
Andrew Lo () (Massachusetts Institute of Technology)
Nicholas Chan () (Massachusetts Institute of Technology)
Blake LeBaron () (Brandeis University)
Tomaso Poggio () (Massachusetts Institute of Technology)

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Abstract

Various studies of asset markets have shown that traders are capable of learning and transmitting information through prices in many situations. In this paper we replace human traders with intelligent software agents in a series of simulated markets. Using these simple learning agents, we are able to replicate several features of the experiments with human subjects, specifically regarding (1) dissemination of information from informed to uninformed traders and (2) aggregation of information spread over different traders.

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File URL: http://www.ai.mit.edu/projects/cbcl/res-area/finance/infoDissAgg.pdf
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Publisher Info
Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 1999 with number 653.

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Date of creation: 01 Mar 1999
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Handle: RePEc:sce:scecf9:653

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  1. Arifovic, Jasmina, 1996. "The Behavior of the Exchange Rate in the Genetic Algorithm and Experimental Economies," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 510-41, June. [Downloadable!] (restricted)
  2. Plott, Charles R & Sunder, Shyam, 1988. "Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets," Econometrica, Econometric Society, vol. 56(5), pages 1085-1118, September. [Downloadable!] (restricted)
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  3. Forsythe, Robert & Palfrey, Thomas R & Plott, Charles R, 1982. "Asset Valuation in an Experimental Market," Econometrica, Econometric Society, vol. 50(3), pages 537-67, May. [Downloadable!] (restricted)
  4. Lettau, Martin, 1997. "Explaining the facts with adaptive agents: The case of mutual fund flows," Journal of Economic Dynamics and Control, Elsevier, vol. 21(7), pages 1117-1147, June. [Downloadable!] (restricted)
  5. W. Brian Arthur & John H. Holland & Blake LeBaron & Richard Palmer & Paul Taylor, 1996. "Asset Pricing Under Endogenous Expectation in an Artificial Stock Market," Working Papers 96-12-093, Santa Fe Institute.
  6. Plott, Charles R. & Sunder, Shyam., . "Efficiency of Experimental Security Markets with Insider Information: An Application of Rational Expectations Models," Working Papers 331, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  7. Jamal, Karim & Sunder, Shyam, 1996. "Bayesian equilibrium in double auctions populated by biased heuristic traders," Journal of Economic Behavior & Organization, Elsevier, vol. 31(2), pages 273-291, November. [Downloadable!] (restricted)
  8. Sunder, S., 1989. "Market For Information: Experimental Evidence," GSIA Working Papers 88-89-53, Carnegie Mellon University, Tepper School of Business.
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  9. Forsythe, Robert & Lundholm, Russell, 1990. "Information Aggregation in an Experimental Market," Econometrica, Econometric Society, vol. 58(2), pages 309-47, March. [Downloadable!] (restricted)
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