Physics – Physics and Society
Scientific paper
2005-03-23
Physics
Physics and Society
7 pages, 12 figures, figures resized in revised version
Scientific paper
A 24-hour exchange market was created on the Web to trade political futures contracts using fictitious money. In this online market, a political futures contract is a futures contract which matures on the election day with a liquidation price determined by the percentage of votes a candidate receives on the election day. Continuous double auctions were implemented as the system for order storage and price discovery. We drew market participants in the form of tournaments in which top traders won cash awards. Such a market was run, with about 400 registered traders, during the U.S. presidential election in November 2004 and Taiwan parliamentary election in December 2004. The experiments recorded transaction price, highest bid, lowest ask, and trading volume of each contract as a function of time. Despite the relatively small scale of the exchange, in terms of the number of participants and duration of the tournament, we report evidence for asymptotic power-law behaviors of the distributions of price returns, trading volumes, inter-transaction time intervals, and accumulated wealth that were found universal in real financial markets.
Chen Shu-Heng
Li Sai-Ping
Tai Chung-Ching
Wang Sun-Chong
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