An Extended Speculation Game for the Recovery of Hurst Exponent of Financial Time Series

Kei Katahira and Yu Chen ()
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Kei Katahira: Graduate School of Frontier Sciences, The University of Tokyo, 5-1-5 Kashiwanoha, Kashiwa-shi, Chiba-ken 277-8563, Japan
Yu Chen: Graduate School of Frontier Sciences, The University of Tokyo, 5-1-5 Kashiwanoha, Kashiwa-shi, Chiba-ken 277-8563, Japan

New Mathematics and Natural Computation (NMNC), 2020, vol. 16, issue 02, 319-325

Abstract: The speculation game is an agent-based toy model to investigate the dynamics of the financial market. Our model has achieved the reproduction of 10 of the well-known stylized facts for financial time series. However, there is also a divergence from the behavior of real market. The market price of the model tends to be anti-persistent to the initial price, resulting in the quite small value of Hurst exponent of price change. To overcome this problem, we extend the speculation game by introducing a perturbative part to the price change with the consideration of other effects besides pure speculative behaviors.

Keywords: Cognitive agent-based model; round-trip trading; financial stylized facts (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S1793005720500192

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