MODIFIED MINORITY GAME 1008 3840 (original) (raw)

Some Remarks About Financial Market Modelling Using a Minority Game Approach

The methods adopted by static physics corroborating the existence of electromagnetic forces are applicable to the theory of financial markets. Perceived from a classically physical angle, the financial market is defined as a system composed of several individual entries cooperating upon electromagnetic principles. The approach concerned gives rise to a certain model of financial market, otherwise known as a minority game. In the case of minority game, the allocation of securities and funds is conditioned exclusively upon the fluctuation of prices, where a higher tendency to purchase goods and stocks results in the scale being more profitable and vice versa. Thus players from a minority group gain a prevailing position.

Using the Minority Game Model to Understand Financial Markets

This paper looks to investigate whether adaptive principles produce a better economic model in comparison to average principles. A game theory problem with binary decision making is introduced in order to answer this question. The problem is implemented via an agent-based model with agents representing traders. One hundred data sets from the NASDAQ index are analysed for stylised facts. Series of financial returns are extracted from the model and analysed for the stylised facts which are present in the real data sets. We find that the model fails to replicate the properties of real world data.

Agent-based simulation of a financial market

Physica A-statistical Mechanics and Its Applications, 2001

This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a given finite portfolio of assets. There is no money-creation process; the total available cash is conserved in time. In each period, agents make random buy and sell decisions that are constrained by available resources, subject to clustering, and dependent on the volatility of previous periods. The model proposed herein is able to reproduce the leptokurtic shape of the probability density of log price returns and the clustering of volatility. Implemented using extreme programming and object-oriented technology, the simulator is a flexible computational experimental facility that can find applications in both academic and industrial research projects.

From Naive to Sophisticated Behavior in Multiagents-Based Financial Market Models

Physica A: Statistical Mechanics and its Applications, 2000

The behavior of physical complexity and mutual information function of the outcome of a model of heterogeneous, inductive rational agents inspired by the El Farol Bar problem and the Minority Game is studied. The ﰚrst magnitude is a measure rooted in the Kolmogorov–Chaitin theory and the second a measure related to Shannon’s information entropy. Extensive computer simulations were done, as a result of which, is proposed an ansatz for physical complexity of the type C(l) = lﰙ and the dependence of the exponent ﰙ from the parameters of the model is established. The accuracy of our results and the relationship with the behavior of mutual information function as a measure of time correlation of agents choice are discussed.

A Simulated Stock Exchange Market: First Results

1998

In this paper, we present a model that simulates the behaviour of a heterogenous collection of nancial traders on a market. Each trader is modelled as an autonomous, interactive agent and the agregation of their behavior results in market behaviour. We speci cally look at the role of information arriving at the market and the in uence of heterogeneity on market dynamics. The main conclusions are that the quality o f the information determines how the market will behave and secondly, heterogeneity i s required in order to nd the right statistical properties of the price and return time series.

Detecting the traders’ strategies in minority–majority games and real stock-prices

Physica A: Statistical Mechanics and its Applications, 2007

Price dynamics is analyzed in terms of a model which includes the possibility of effective forces due to trend followers or trend adverse strategies. The method is tested on the data of a minoritymajority model and indeed it is capable of reconstructing the prevailing traders' strategies in a given time interval. Then we also analyze real (NYSE) stock-prices dynamics and it is possible to derive an indication for the the "sentiment" of the market for time intervals of at least one day.

Minority Game Data Mining for Stock Market Predictions

Lecture Notes in Computer Science, 2010

The Minority Game (MG) is a simple model for understanding collective behavior of agents in an idealized situation for a finite resource. It has been regarded as an interesting complex dynamical disordered system from a statistical mechanics point of view. In previous work, we have investigated the problem of learning the agent behaviors in the minority game by assuming the existence of one "intelligent agent" who can learn from other agent behaviors. In this paper, we propose a framework, Minority Game Data Mining (MGDM), that assumes the collective data are generated from combining the behaviors of variant groups of agents following the minority game. We then apply this framework to real-world time-series data analysis by testing on a few stocks from the Chinese market and the US Dollar-RMB exchange rate. The experimental results suggest that the winning rate of the new model is statistically better than a random walk.

Induced Minority Dynamics in a Stock Market Model

2003

In this paper, we present a simple stock market model (the market game) which incorporates, as ab initio dynamics delayed majority dynamics, according to which agents (with heterogeneous strategies and price expectations) are rewarded if their actions at time t are the actions of the majority of agents at time t+1. We observe that for a range of parameter settings, minority dynamics are dynamically induced in this game, despite the fact that they are not introduced ab initio. Central to the emergence of minority dynamics is the introduction of the notion of price expectations for the agents. This leads to the possibility of an agent not participating in the market for some time steps. One consequence of the induced minority dynamics is an effective reduction in market volatility. We also discuss the phase structure and qualitative behavior of the market game for the entire parameter space.