Who wins? Study of long-run trader survival in an artificial stock market
Silvano Cincotti (),
Sergio M. Focardi,
Michele Marchesi and
Marco Raberto ()
Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 227-233
We introduce a multi-asset artificial financial market with finite amount of cash and number of stocks. The background trading is characterized by a random trading strategy constrained by the finiteness of resources and by market volatility. Stock price processes exhibit volatility clustering, fat-tailed distribution of returns and reversion to the mean. Three active trading strategies have been introduced and studied in two different market conditions: steady market and growing market with asset inflation. We show that the profitability of each strategy depends both on the periodicity of portfolio reallocation and on the market condition. The best performing strategy is the one that exploits the mean reversion characteristic of asset price processes.
Keywords: Artificial financial markets; Heterogeneous agents; Econophysics (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:324:y:2003:i:1:p:227-233
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