Evaluation of automated-trading strategies using an artificial market

Authors:
K. Izumi;F. Toriumi;H. Matsui
Affiliations:
Digital Human Research Center, AIST, 2-41-6 Aomi, Koto-ku, Tokyo 135-0064, Japan;Graduate School of Information Science, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, Aichi 464-8601, Japan and Trade Science Corporation, Japan;CMD Laboratory Inc., Tokyo Estate Bldg. 2F, 1-3-2, Sendagaya, Shibuya-ku, Tokyo, 151-0051, Japan
Venue:
Neurocomputing
Year:
2009

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Abstract

The purpose of this study was to extend the simulation of artificial markets to the practical application. We constructed an artificial-market system with an interface with the automated-trading strategies. Then, using an artificial-market simulation, we conducted two types of evaluations of automated-trading strategies that could participate in a Kaburobo competition. (1) Our system evaluated the risks and returns of the strategies in various market environments. An evaluation using the artificial market was able to provide better information than a conventional evaluation using a back test. (2) Our system could also test the market impact of automated-trading strategies. Our results revealed that the market impact of the strategies may not only depend on their rule content but also on the way they are combined with other strategies.