Stock market microstructure inference via multi-agent reinforcement learning

J. Lussange, I. Lazarevich, Sacha Bourgeois-Gironde, S. Palminteri and B. Gutkin

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Abstract: Quantitative finance has had a long tradition of a bottom-up approach to complex systems inference via multi-agent systems (MAS). These statistical tools are based on modelling agents trading via a centralised order book, in order to emulate complex and diverse market phenomena. These past financial models have all relied on so-called zero-intelligence agents, so that the crucial issues of agent information and learning, central to price formation and hence to all market activity, could not be properly assessed. In order to address this, we designed a next-generation MAS stock market simulator, in which each agent learns to trade autonomously via model-free reinforcement learning. We calibrate the model to real market data from the London Stock Exchange over the years $2007$ to $2018$, and show that it can faithfully reproduce key market microstructure metrics, such as various price autocorrelation scalars over multiple time intervals. Agent learning thus enables model emulation of the microstructure with greater realism.

Date: 2019-09, Revised 2019-10
New Economics Papers: this item is included in nep-fmk
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http://arxiv.org/pdf/1909.07748 Latest version (application/pdf)

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Working Paper: Stock market microstructure inference via multi-agent reinforcement learning (2019)
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