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

  • Challet, Damien

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://www.sciencedirect.com/science/article/B6V85-4N9MYFR-4/2/ec663b864b6b4ba9fc35f86b3e88df3c
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 32 (2008)
Issue (Month): 1 (January)
Pages: 85-100

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Handle: RePEc:eee:dyncon:v:32:y:2008:i:1:p:85-100
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  1. D. Challet & A. Chessa & M. Marsili & Y. -C. Zhang, 2000. "From Minority Games to real markets," Papers cond-mat/0011042, arXiv.org.
  2. Damien Challet & Matteo Marsili & Yi-Cheng Zhang, 1999. "Modeling Market Mechanism with Minority Game," Papers cond-mat/9909265, arXiv.org.
  3. Brock, W.A. & Hommes, C.H., 1996. "A Rational Route to Randomness," Working papers 9530r, Wisconsin Madison - Social Systems.
  4. 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.
  5. R. Rothenstein & K. Pawelzik, 2002. "Evolution and anti-evolution in a minimal stock market model," Papers nlin/0211010, arXiv.org, revised May 2003.
  6. 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.
  7. J. Doyne Farmer, 1998. "Market Force, Ecology, and Evolution," Research in Economics 98-12-117e, Santa Fe Institute.
  8. Farmer, J. Doyne & Joshi, Shareen, 2002. "The price dynamics of common trading strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 49(2), pages 149-171, October.
  9. 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.
  10. 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.
  11. 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.
  12. Damien Challet & Matteo Marsili & Gabriele Ottino, 2004. "Shedding light on El Farol," Game Theory and Information 0406002, EconWPA.
  13. Matteo Marsili, 2002. "Dissecting financial markets: sectors and states," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 297-302.
  14. 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.
  15. Matteo Marsili, 2002. "Dissecting financial markets: Sectors and states," Papers cond-mat/0207156, arXiv.org.
  16. Yi-Cheng Zhang, 2001. "Why Financial Markets Will Remain Marginally Inefficient?," Papers cond-mat/0105373, arXiv.org.
  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.
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