Artificial Markets under a Complexity Perspective
The focus of this study is to build, from the ‘bottom-up’, a market with artificially intelligent adaptive agents based on the institutional arrangement of the Colombian Foreign Exchange Market (1994-1999) in order to determine simple agents’ design, rules and interactions that are sufficient to create interesting behaviours at the macroscopic level - emerging patterns that replicate the properties of the time series from the case study. Tools from artificial intelligence research, such as genetic algorithms and fuzzy logic, are the basis of the agents’ mental models, which in turn are used for forecasting, quoting and learning purposes in a double auction market. Sets of fuzzy logic rules yield adequate, approximately continuous risk and utility preferences without the need to fix their mathematical form ex-ante. Statistical properties of financial time series are generated by the artificial market, as well as some additional non-linearity linked to the existence of a crawling band. Moreover, the behaviour of the simulated exchange rate is consistent with currency band theory. Agent’s learning favours forecasting rules based on regulatory signals against rules based on fundamental information. Also, intra-day volatility is strongly linked to the rate of arrival and size of real sector trades. Intra-day volatility is also a function of the frequency of learning and search specialisation. It is found that when a moderately low frequency of learning is used, volatility increases.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: Cra 7 # 14-78 Piso 7|
Phone: (57-1) 3431111
Fax: (57-1) 2841686
Web page: http://www.banrep.gov.co/es/publicaciones-buscador/23
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holland, John H & Miller, John H, 1991. "Artificial Adaptive Agents in Economic Theory," American Economic Review, American Economic Association, vol. 81(2), pages 365-71, May.
- repec:att:wimass:9721 is not listed on IDEAS
- Brooks, Chris & Reveiz, Alejandro H., 2002. "A model for exchange rates with crawling bands--an application to the Colombian peso," Journal of Economics and Business, Elsevier, vol. 54(5), pages 483-503.
- Steven N. Durlauf, 1997.
"What Should Policymakers Know About Economic Complexity?,"
97-10-080, Santa Fe Institute.
- Miller, Ross M., 1996. "Smart market mechanisms: From practice to theory," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 967-978.
- Williams, Arlington W & Smith, Vernon L, 1984. "Cyclical Double-Auction Markets with and without Speculators," The Journal of Business, University of Chicago Press, vol. 57(1), pages 1-33, January.
When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:510. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)
If references are entirely missing, you can add them using this form.