A comparison of different trading protocols in an agent-based market

Paolo Pellizzari and Arianna Dal Forno
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Arianna Dal Forno: Department of Applied Mathematics, University of Venice

No 140, Working Papers from Department of Applied Mathematics, Università Ca' Foscari Venezia

Abstract: We compare price dynamics of different market protocols (batch auction, continuous double auction and dealership) in an agent-based artificial exchange. In order to distinguish the effects of market architectures alone, we use a controlled environment where allocative and informational issues are neglected and agents do not optimize or learn. Hence, we rule out the possibility that the behavior of traders drives the price dynamics. Aiming to compare price stability and execution quality in broad sense, we analyze standard deviation, excess kurtosis, tail exponent of returns, volume, perceived gain by traders and bid-ask spread. Overall, a dealership market appears to be the best candidate, generating low volume and volatility, virtually no excess kurtosis and high perceived gain.

Keywords: Agent-based models; artificial markets; comparison of market protocols. (search for similar items in EconPapers)
JEL-codes: C15 D44 N22 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2006-07
New Economics Papers: this item is included in nep-cmp and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: A comparison of different trading protocols in an agent-based market (2007)
Working Paper: A comparison of different trading protocols in an agent-based market (2005)
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