A simulated electronic market with speculative behaviour and bubble formation

Nicolas Cofre and Magdalena Mosionek-Schweda

Papers from arXiv.org

Abstract: This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The speculators have a distribution of returns concentrated on negative returns, with a small fraction making profits. The market experiences an increased volatility and prices that greatly depart from the fundamental value of the asset. Our research provides synthetic datasets of the order book to study its dynamics under different levels of speculation

Date: 2023-11
New Economics Papers: this item is included in nep-cmp, nep-hme and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2311.12247

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