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Inter-pattern speculation: beyond minority, majority and $-games

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  • Damien Challet

    (Oxford University)

Abstract

A new model of financial market is proposed, based on the sequential and inter-temporal nature of trader-trader interaction. In this pattern- based speculation model, the traders open and close their positions explicitely. Information ecology can be precisely characterised, and is strikingly similar to that of the Minority Game. Naive and sophisticated agents are shown to give rise to very different phenomenology.

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File URL: http://128.118.178.162/eps/fin/papers/0503/0503006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0503006.

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Length: 6 pages
Date of creation: 09 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0503006

Note: Type of Document - pdf; pages: 6
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Web page: http://128.118.178.162

Related research

Keywords: Financial market; agent-based modelling; minority game; majority game; $-game; information; market efficiency;

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References

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  1. Zhang, Yi-Cheng, 1999. "Toward a theory of marginally efficient markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 269(1), pages 30-44.
  2. J. Doyne Farmer & Shareen Joshi, 2000. "The price dynamics of common trading strategies," Papers cond-mat/0012419, arXiv.org.
  3. Damien Challet & Tobias Galla, 2005. "Price return autocorrelation and predictability in agent-based models of financial markets," Quantitative Finance, Taylor & Francis Journals, vol. 5(6), pages 569-576.
  4. J. Doyne Farmer, 2002. "Market force, ecology and evolution," Industrial and Corporate Change, Oxford University Press, vol. 11(5), pages 895-953, November.
  5. Challet, Damien & Marsili, Matteo & Zhang, Yi-Cheng, 2000. "Modeling market mechanism with minority game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 276(1), pages 284-315.
  6. Challet, D. & Zhang, Y.-C., 1997. "Emergence of cooperation and organization in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 407-418.
  7. Challet, Damien & Marsili, M & Ottino, Gabriele, 2004. "Shedding light on El Farol," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 332(C), pages 469-482.
  8. D. Challet & A. Chessa & M. Marsili & Y. -C. Zhang, 2000. "From Minority Games to real markets," Papers cond-mat/0011042, arXiv.org.
  9. Brock, W.A. & Hommes, C.H., 1996. "A Rational Route to Randomness," Working papers 9530r, Wisconsin Madison - Social Systems.
  10. Marsili, Matteo, 2001. "Market mechanism and expectations in minority and majority games," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 93-103.
  11. Rothenstein, R & Pawelzik, K, 2003. "Evolution and anti-evolution in a minimal stock market model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 326(3), pages 534-543.
  12. Matteo Marsili, 2002. "Dissecting financial markets: sectors and states," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 297-302.
  13. Yi-Cheng Zhang, 2001. "Why Financial Markets Will Remain Marginally Inefficient?," Papers cond-mat/0105373, arXiv.org.
  14. repec:fth:louvco:9131 is not listed on IDEAS
  15. R. Rothenstein & K. Pawelzik, 2002. "Evolution and anti-evolution in a minimal stock market model," Papers nlin/0211010, arXiv.org, revised May 2003.
  16. Slanina, František & Zhang, Yi-Cheng, 2001. "Dynamical spin-glass-like behavior in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 289(1), pages 290-300.
  17. Challet, Damien, 2004. "Minority mechanisms in models of agents learning collectively a resource level," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 24-29.
  18. Matteo Marsili, 2002. "Dissecting financial markets: Sectors and states," Papers cond-mat/0207156, arXiv.org.
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Citations

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Cited by:
  1. Li-Xin Zhong & Wen-Juan Xu & Fei Ren & Yong-Dong Shi, 2012. "Coupled effects of market impact and asymmetric sensitivity in financial markets," Papers 1209.3399, arXiv.org, revised Jan 2013.
  2. Zhong, Li-Xin & Xu, Wen-Juan & Ren, Fei & Shi, Yong-Dong, 2013. "Coupled effects of market impact and asymmetric sensitivity in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(9), pages 2139-2149.
  3. Karol Wawrzyniak & Wojciech Wislicki, 2011. "Mesoscopic approach to minority games in herd regime," Papers 1112.0210, arXiv.org.
  4. Ren, F. & Zhang, Y.C., 2008. "Trading model with pair pattern strategies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(22), pages 5523-5534.
  5. Takero Ibuki & Jun-ichi Inoue, 2011. "Response of double-auction markets to instantaneous Selling–Buying signals with stochastic Bid–Ask spread," Journal of Economic Interaction and Coordination, Springer, vol. 6(2), pages 93-120, November.
  6. Luca Grilli & Angelo Sfrecola, 2005. "Neural Networks to Predict Financial Time Series in a Minority Game Context," Quaderni DSEMS 14-2005, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
  7. Jean-Philippe Bouchaud, 2011. "Panel Statement: The endogenous dynamics of markets: price impact and feedback loops," Chapters, European Central Bank.
  8. Ted Theodosopoulos & Ming Yuen, 2006. "Imbalance attractors for a strategic model of market microstructure," Papers math/0605421, arXiv.org.
  9. B. A. Mello & V. M.C.S. Souza & D. O. Cajueiro & R. F.S. Andrade, 2010. "Network evolution based on minority game with herding behavior," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 76(1), pages 147-156, July.
  10. Li-Xin Zhong & Wen-Juan Xu & Ping Huang & Chen-Yang Zhong & Tian Qiu, 2013. "Self-organization and phase transition in financial markets with multiple choices," Papers 1312.0690, arXiv.org, revised Jun 2014.

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