Complexity Digest 2000.44 - 13
From Minority Games To Real Markets, arXiv
Abstract: We address the question of market efficiency
using the Minority Game (MG) model. First we show that removing
unrealistic features of the MG leads to models which reproduce a
scaling behavior close to what is observed in real markets. In
particular we find that i) fat tails and clustered volatility
arise at the phase transition point and that ii) the crossover to
random walk behavior of prices is a finite size effect. This, on
one hand, suggests that markets operate close to criticality,
where the market is marginally efficient. On the other it allows
one to measure the distance from criticality of real market, using
cross-over times. The artificial market described by the MG is
then studied as an ecosystem with different_species_ of traders.
This clarifies the nature of the interaction and the particular
role played by the various populations.