Time series analysis for minority game simulations of financial markets

Details Time series analysis for minority game simulations of financial markets Time series analysis for minority game simulations of financial markets

2002-03-13

arxiv.org/abs/physics/0203038v3

Physica A 321 (2003) 619-632

Physics

Data Analysis, Statistics and Probability

LaTeX 2e (elsart), 17 pages, 3 EPS figures and 2 tables, accepted for publication in Physica A

Scientific paper

10.1016/S0378-4371(02)01733-8

The minority game (MG) model introduced recently provides promising insights into the understanding of the evolution of prices, indices and rates in the financial markets. In this paper we perform a time series analysis of the model employing tools from statistics, dynamical systems theory and stochastic processes. Using benchmark systems and a financial index for comparison, several conclusions are obtained about the generating mechanism for this kind of evolut ion. The motion is deterministic, driven by occasional random external perturbation. When the interval between two successive perturbations is sufficiently large, one can find low dimensional chaos in this regime. However, the full motion of the MG model is found to be similar to that of the first differences of the SP500 index: stochastic, nonlinear and (unit root) stationary.

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