A SIMULATION OF AGENT-BASED MODELS FOR HIGH FREQUENCY TRADING ON THE STOCK EXCHANGE MARKET

Diana Dezsi
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Diana Dezsi: Bucharest University of Economic Studies

Theoretical and Applied Economics, 2013, vol. XX, issue Special I, 339-356

Abstract: High frequency computer-based trading (HFT) represents a challenging topic nowadays, mainly due to the controversy it creates among investors on the financial market. The hereto paper uses two types of agent-based models, one with zero-intelligence traders and the other with intelligent traders in order to simulate the tick-by-tick high frequency trading market for ten US stocks. The results show that in almost all the cases the intelligent agent-based model performed better when compared to the zero-intelligence agentbased model, which could be interpreted as lower market efficiency, allowing for predictions of the stock market price, or even stock market manipulation.

Keywords: high frequency trading; agent-based modeling; zero-intelligence traders; double auction; financial markets. (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xx:y:2013:i:special-i:p:339-356

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