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, University of Venice

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: N22 D44 C15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-mst
Date: 2006-07
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Related works:
Working Paper: A comparison of different trading protocols in an agent-based market (2005)
Journal Article: A comparison of different trading protocols in an agent-based market (2007)
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