Toth, Bence and Scalas, Enrico and Huber, Juergen and Kirchler, Michael (2006): The value of information in a multi-agent market model.
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We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic relationship of net returns of traders as a function of information levels, both in the experiments and in the simulations. Particularly, averagely informed traders perform worse than the non informed and only traders with high levels of information (insiders) are able to beat the market. The simulations and the experiments reproduce many stylized facts of stock markets, such as fast decay of autocorrelation of returns, volatility clustering and fat-tailed distribution of returns. These results have an important message for everyday life. They can give a possible explanation why, on average, professional fund managers perform worse than the market index.
|Item Type:||MPRA Paper|
|Original Title:||The value of information in a multi-agent market model|
|Keywords:||Economics; econophysics; financial markets; business and management; information theory and communication theory|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C63 - Computational Techniques; Simulation Modeling
C - Mathematical and Quantitative Methods > C0 - General > C00 - General
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
|Depositing User:||Enrico Scalas|
|Date Deposited:||09. Oct 2006|
|Last Modified:||23. Feb 2013 15:23|
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