Trading behavior and excess volatility in toy markets

Details Trading behavior and excess volatility in toy markets Trading behavior and excess volatility in toy markets

2000-04-21

arxiv.org/abs/cond-mat/0004376v2

Physics

Condensed Matter

Statistical Mechanics

14 pages, 4 figures, minor changes

Scientific paper

We study the relation between the trading behavior of agents and volatility in toy markets of adaptive inductively rational agents. We show that excess volatility, in such simplified markets, arises as a consequence of {\em i)} the neglect of market impact implicit in price taking behavior and of {\em ii)} excessive reactivity of agents. These issues are dealt with in detail in the simple case without public information. We also derive, for the general case, the critical learning rate above which trading behavior leads to turbulent dynamics of the market.

Affiliated with

Also associated with

No associations

Rating

Trading behavior and excess volatility in toy markets does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Trading behavior and excess volatility in toy markets, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Trading behavior and excess volatility in toy markets will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-517127