A comparison of different trading protocols in an agent-based market
AbstractWe compare price dynamics of different market protocols (batch auction, continuous double auction and dealership) in an agent-based artificial exchange. In order to distinguish the effects of market architectures alone, we use a controlled environment where allocative and informational issues are neglected and agents do not optimize or learn. Hence, we rule out the possibility that the behavior of traders drives the price dynamics. Aiming to compare price stability and execution quality in broad sense, we analyze standard deviation, excess kurtosis, tail exponent of returns, volume, perceived gain by traders and bid-ask spread. Overall, a dealership market appears to be the best candidate, generating low volume and volatility, virtually no excess kurtosis and high perceived gain.
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Bibliographic InfoPaper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 140.
Length: 20 pages
Date of creation: Jul 2006
Date of revision:
Agent-based models; artificial markets; comparison of market protocols.;
Other versions of this item:
- Paolo Pellizzari & Arianna Forno, 2007. "A comparison of different trading protocols in an agent-based market," Journal of Economic Interaction and Coordination, Springer, vol. 2(1), pages 27-43, June.
- Paolo Pellizzari & Arianna Dal Forno, 2005. "A comparison of different trading protocols in an agent-based market," Computational Economics 0511001, EconWPA.
- N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-CMP-2006-11-18 (Computational Economics)
- NEP-MST-2006-11-18 (Market Microstructure)
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