Evolutionary model on market ecology of investors and investments

Ya-Chun Gao, Shi-Min Cai, Linyuan Lü and Bing-Hong Wang

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 16, 3385-3391

Abstract: The interactions between investors and investments are of significant importance to understand the dynamics of financial markets. An evolutionary model is proposed to investigate the dynamic behaviors of investors and investments in a market ecology. The investors are divided into two groups, active ones and passive ones, distinguished by different selection capabilities based on the partial information, while the investments are simply categorized as good ones and bad ones. Without external influence, the system consisting of both investors and investments can self-organize to a quasi-stationary state according to their own strategies associating with the gains of market information. The model suggests that the partial information asymmetry of investors and various qualities of investments commonly give rise to a diverse dynamic behavior of the system by quantifying the fraction of active investors and of good investment at the quasi-stationary state.

Keywords: Econophysics; Evolutionary model; Market ecology; Financial market; Complex system (search for similar items in EconPapers)
Date: 2013
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:16:p:3385-3391

DOI: 10.1016/j.physa.2013.04.007

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