The Simulation of Financial Markets by Agent-Based Mix-Game Models

Chengling Gou ()
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Chengling Gou: http://gouchengling.home4u.china.com

Journal of Artificial Societies and Social Simulation, 2006, vol. 9, issue 3, 6

Abstract: This paper studies the simulation of financial markets using an agent-based mix-game model which is a variant of the minority game (MG). It specifies the spectra of parameters of mix-game models that fit financial markets by investigating the dynamic behaviors of mix-game models under a wide range of parameters. The main findings are (a) in order to approach efficiency, agents in a real financial market must be heterogeneous, boundedly rational and subject to asymmetric information; (b) an active financial market must be dominated by agents who play a minority game; otherwise, the market would die; (c) the system could be stable if agents who play a majority game have a faster learning rate than those who play a minority game; otherwise, the system could be unstable. The paper then induces the rules for simulating financial markets with mix-game models and gives an example. Finally, the appendix of this paper presents background information about 'El Farol bar', MG and mix-games.

Keywords: Financial Markets; Simulation; Minority Game; Mix-Game (search for similar items in EconPapers)
Date: 2006-06-30
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Persistent link: https://EconPapers.repec.org/RePEc:jas:jasssj:2005-84-4

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