Agent-Based Models of Financial Markets: A Comparison with Experimental Markets
Massachusetts Institute of Technology (MIT) - Brain and Cognitive Sciences
Andrew W. Lo
Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER)
Brandeis University - International Business School
Nicholas T. Chan
AlphaSimplex Group, LLC
MIT Sloan Working Paper No. 4195-01
We construct a computer simulation of a repeated double-auction market, designed to match those in experimental-market settings with human subjects, to model complex interactions among artificially-intelligent traders endowed with varying degrees of learning capabilities. In the course of six different experimental designs, we investigate a number of features of our agent-based model: the price efficiency of the market, the speed at which prices converge to the rational expectations equilibrium price, the dynamics of the distribution of wealth among the different types of AI-agents, trading volume, bid/ask spreads, and other aspects of market dynamics. We are able to replicate several endings of human-based experimental markets, however, we also and intriguing differences between agent-based and human-based experiments.
Number of Pages in PDF File: 47
Keywords: Agent-Based Models, Artificial Markets, Experimental Markets, Market Microstructureworking papers series
Date posted: November 19, 2001
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 0.297 seconds