Stylized facts of financial markets and market crashes in Minority Games

Damien Challet, Matteo Marsili and Yi-Cheng Zhang

Papers from arXiv.org

Abstract: We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which grant them a positive gain. Indeed the average number of active speculators grows with the amount of information that producers inject into the market. Transitions between equilibrium and out of equilibrium behavior are observed when the relative number of speculators to the complexity of information or to the number of producers are changed. When the system is out of equilibrium, stylized facts arise, such as fat tailed distribution of returns and volatility clustering. Without speculators, the price follows a random walk; this implies that stylized facts arise because of the presence of speculators. Furthermore, if speculators abandon price taking behavior, stylized facts disappear.

Date: 2001-01
References: Add references at CitEc
Citations: View citations in EconPapers (55)

Downloads: (external link)
http://arxiv.org/pdf/cond-mat/0101326 Latest version (application/pdf)

Related works:
Journal Article: Stylized facts of financial markets and market crashes in Minority Games (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/0101326

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().