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Rate of Return Parity with Robot Asset Traders

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  • Jason Childs

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Abstract

Human populated experimental asset markets produce data with two major qualitative consistencies; finite price bubbles and rate of return parity. Robot traders following different behavioural rules are used to create data that is qualitatively similar to that produced by human subjects in a laboratory setting. A trend pricing component of behaviour is required for robots to generate finite price bubbles. A single arbitrageur in combination with trend pricing and simple profit maximization is required to generate rate of return parity. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Jason Childs, 2007. "Rate of Return Parity with Robot Asset Traders," Computational Economics, Springer;Society for Computational Economics, vol. 29(1), pages 1-12, February.
  • Handle: RePEc:kap:compec:v:29:y:2007:i:1:p:1-12
    DOI: 10.1007/s10614-006-9060-4
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    File URL: http://hdl.handle.net/10.1007/s10614-006-9060-4
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    References listed on IDEAS

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    1. Timothy N. Cason & Daniel Friedman, 1997. "Price Formation in Single Call Markets," Econometrica, Econometric Society, vol. 65(2), pages 311-346, March.
    2. Sunder, S., 1992. "Experimental Asset Markets: A Survey," GSIA Working Papers 1992-19, Carnegie Mellon University, Tepper School of Business.
    3. Youssefmir, Michael & Huberman, Bernardo A & Hogg, Tad, 1998. "Bubbles and Market Crashes," Computational Economics, Springer;Society for Computational Economics, vol. 12(2), pages 97-114, October.
    4. Steiglitz, Ken & Shapiro, Daniel, 1998. "Simulating the Madness of Crowds: Price Bubbles in an Auction-Mediated Robot Market," Computational Economics, Springer;Society for Computational Economics, vol. 12(1), pages 35-59, August.
    5. Gode, D.K. & Sunder, S., 1991. "Allocative Efficiency of Markets with Zero Intelligence (Z1) Traders: Market as a Partial Substitute for Individual Rationality," GSIA Working Papers 1992-16, Carnegie Mellon University, Tepper School of Business.
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    More about this item

    Keywords

    interest rate parity; rate of return parity; arbitrage; C89; F3; G12;

    JEL classification:

    • C89 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other
    • F3 - International Economics - - International Finance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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