Investigating the role of social behavior in financial markets through agent-based simulation

Authors:
Alessia Mauri;Andrea G. B. Tettamanzi
Affiliations:
Università degli Studi di Milano, Via Bramante, Crema (CR), Italy;Università degli Studi di Milano, Via Bramante, Crema (CR), Italy
Venue:
Proceedings of the 11th International Conference on Autonomous Agents and Multiagent Systems - Volume 3
Year:
2012

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Abstract

An evolutionary agent-based model inspired by the adaptive market hypothesis is used to investigate the link between the microscopic parameter of sentiment and market price movements. Agents model cognitive and social behaviors by means of rules wired into their decision-making models and of parameters encoded in their genome. Results show that co-evolution and social interaction among traders are responsible for bubbles and crashes.