Network Topology and the Behaviour of Socially-Embedded Financial Markets
12 Pages Posted: 21 Feb 2018
Date Written: February 10, 2018
We study the impact of the network topology on various market parameters (volatility, liquidity and efficiency) when three populations or artificial trades interact (Noise, Informed and Social Traders). We show, using an agent-based set of simulations that choosing a Regular, a Erdös-Rényi or a scale free network and locating on each vertex one Noise, Informed or Social Trader, substantially modifies the dynamics of the market. The overall level of volatility, the liquidity and the resulting efficiency are impacted by this initial choice in various ways which also depends upon the proportion of Informed vs. Noise Traders.
Keywords: Agent based artificial markets, Networks
JEL Classification: G10
Suggested Citation: Suggested Citation