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A comparison of different trading protocols in an agent-based market

Paolo Pellizzari () and Arianna Dal Forno
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Arianna Dal Forno: Dept. of Applied Mathematics

Computational Economics from EconWPA

Abstract: We compare price dynamics of different market protocols (batch auction, continuous double auction and dealership) in an agent-based artificial exchange. In order to distinguish the effects of market architectures alone, we use a controlled environment where allocative and informational issues are neglected and agents do not optimize or learn. Hence, we rule out the possibility that the behaviour of traders drives the price dynamics. Aiming to compare price stability and execution quality in broad sense, we analyze standard deviation, excess kurtosis, tail exponent of returns, volume, perceived gain by traders and bid-ask spread. Overall, a dealership market appears to be the best candidate in this respect, generating low volume and volatility, virtually no excess kurtosis and high perceived gain.

Keywords: Artificial markets; Agent-based models; Microstructural architectures (search for similar items in EconPapers)
JEL-codes: C8 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2005-11-04
Note: Type of Document - pdf; pages: 20. Pdf file, 20 pages, produced using LaTex and TeXShop on a Mac
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Related works:
Journal Article: A comparison of different trading protocols in an agent-based market (2007) Downloads
Working Paper: A comparison of different trading protocols in an agent-based market (2006) Downloads
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