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Robot traders can prevent extreme events in complex stock markets

Author

Listed:
  • Suhadolnik, Nicolas
  • Galimberti, Jaqueson
  • Da Silva, Sergio

Abstract

If stock markets are complex, monetary policy and even financial regulation may be useless to prevent bubbles and crashes. Here, we suggest the use of robot traders as an anti-bubble decoy. To make our case, we put forward a new stochastic cellular automata model that generates an emergent stock price dynamics as a result of the interaction between traders. After introducing socially integrated robot traders, the stock price dynamics can be controlled, so as to make the market more Gaussian.

Suggested Citation

  • Suhadolnik, Nicolas & Galimberti, Jaqueson & Da Silva, Sergio, 2010. "Robot traders can prevent extreme events in complex stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5182-5192.
  • Handle: RePEc:eee:phsmap:v:389:y:2010:i:22:p:5182-5192
    DOI: 10.1016/j.physa.2010.07.025
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    Cited by:

    1. repec:kap:compec:v:50:y:2017:i:3:d:10.1007_s10614-016-9591-2 is not listed on IDEAS
    2. Jaqueson K. Galimberti & Nicolas Suhadolnik & Sergio Silva, 2017. "Cowboying Stock Market Herds with Robot Traders," Computational Economics, Springer;Society for Computational Economics, vol. 50(3), pages 393-423, October.
    3. Da Silva, Sergio, 2014. "Why Not Use Robots to Stabilize Stock Markets?," MPRA Paper 60567, University Library of Munich, Germany.
    4. Da Silva, Sergio, 2013. "Time to abandon group thinking in economics," MPRA Paper 45660, University Library of Munich, Germany.

    More about this item

    Keywords

    Stock markets; Robot traders; Financial regulation; Econophysics;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises

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