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Dynamic Regimes of a Multi-agent Stock Market Model

Dynamic Regimes of a Multi-agent Stock Market Model. Tongkui (Kevin) Yu, Honggang Li Department of Systems Science, School of Management, BNU. Dynamic Regime. Source: www.sohu.com. Dynamic Regime. Source: www.sohu.com. Motivation.

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Dynamic Regimes of a Multi-agent Stock Market Model

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  1. Dynamic Regimes of a Multi-agent Stock Market Model Tongkui (Kevin) Yu, Honggang Li Department of Systems Science, School of Management, BNU Complex’ 2009 Shanghai, China

  2. Dynamic Regime Source: www.sohu.com

  3. Dynamic Regime Source: www.sohu.com

  4. Motivation • Aim: (1)to find an underlying mechanism producing various dynamic regimes; (2) to investigate the factors (traders’ propensities) determining the market in which regime. Similar trading rules Similar traders Various regimes

  5. Related works • Many models have been built to replicate different dynamic regimes: • Chiarella, C. (1992,2001,2004) • Lux, T. (1995,1998,1999) • Brock, W. A., Hommes, C. H. (1997, 2001) • ……

  6. Bottom-up modeling • Consider the behavioral pattern of traders (agents) and model it as the switch probability among different groups • Derive a dynamical system to approximate the market evolution • So, the dynamical system has parameters for traders’ propensities

  7. Our work • Follows Lux’s bottom up approach. • Builds a multi-agent model with four kinds of dynamic regimes (fundamental equilibrium, non-fundamental equilibrium, periodicity and chaos). • Concentrates on analyzing the effect of traders’ propensities (mimetic propensity, price-chasing propensity and strategy-switching propensity) on market dynamic regimes.

  8. 3 Outline: 2 1

  9. Multi-agent Stock Market Model • Market components (chartists) (optimistic chartists) (pessimistic chartists) (fundamentalists)

  10. Multi-agent Stock Market Model • Traders behavior • Modeled as the switch probability among different groups

  11. Model • Switch probability between n+ and n− • : market sentiment index • : mimetic propensity • : price-chasing propensity

  12. Model • Switch probability between nc and nf • : strategy-switching propensity

  13. Model • Price formation

  14. Procedure: Multi-agent Stock Market Model

  15. Outline: 2

  16. Stock Market Dynamical System Where: market sentiment index market rationality index p : market price

  17. 3 Outline:

  18. Fundamental equilibrium Dynamic regimes

  19. Dynamic regimes • Symmetric non-fundamental equilibrium

  20. Dynamic regimes - Periodicity

  21. Dynamic regimes - Chaos

  22. Dynamic regimes – an overview with bifurcation diagram

  23. Dynamic regimes – an overview with phase diagram

  24. Conclusion • Present an underlying mechanism that gives reasonable explanations to four kinds of market regimes. • Traders' behavioral propensities play an important role in determining market dynamic regimes.

  25. Further research • Exact parameter ranges within which different solutions occur. • Parameter calibration to make the model precise enough to describe the dynamics of a real market • Slow parameters and fast parameters

  26. Thanks for patience！Suggestions welcome!

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