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

  • Damien Challet

    (Oxford University)

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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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
Contact details of provider: Web page: http://128.118.178.162

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  1. J. Doyne Farmer, 1999. "Market Force, Ecology, and Evolution," Computing in Economics and Finance 1999 651, Society for Computational Economics.
  2. J. Doyne Farmer & Shareen Joshi, 2000. "The Price Dynamics of Common Trading Strategies," Working Papers 00-12-069, Santa Fe Institute.
  3. D. Challet & A. Chessa & M. Marsili & Y-C. Zhang, 2001. "From Minority Games to real markets," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 168-176.
  4. 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.
  5. Damien Challet & Tobias Galla, 2004. "Price return auto-correlation and predictability in agent-based models of financial markets," Papers cond-mat/0404264, arXiv.org, revised Dec 2004.
  6. Brock, W.A. & Hommes, C.H., 1996. "A Rational Route to Randomness," Working papers 9530r, Wisconsin Madison - Social Systems.
  7. 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.
  8. 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.
  9. Damien Challet & Matteo Marsili & Gabriele Ottino, 2004. "Shedding light on El Farol," Game Theory and Information 0406002, EconWPA.
  10. 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.
  11. 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.
  12. Yi-Cheng Zhang, 2001. "Why Financial Markets Will Remain Marginally Inefficient?," Papers cond-mat/0105373, arXiv.org.
  13. Matteo Marsili, 2002. "Dissecting financial markets: sectors and states," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 297-302.
  14. 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.
  15. 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.
  16. Matteo Marsili, 2002. "Dissecting financial markets: Sectors and states," Papers cond-mat/0207156, arXiv.org.
  17. R. Rothenstein & K. Pawelzik, 2002. "Evolution and anti-evolution in a minimal stock market model," Papers nlin/0211010, arXiv.org, revised May 2003.
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