A simulated electronic market with speculative behaviour and bubble formation
Trading and Market Microstructure
2023-11-22 v1
Abstract
This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The speculators have a distribution of returns concentrated on negative returns, with a small fraction making profits. The market experiences an increased volatility and prices that greatly depart from the fundamental value of the asset. Our research provides synthetic datasets of the order book to study its dynamics under different levels of speculation
Keywords
Cite
@article{arxiv.2311.12247,
title = {A simulated electronic market with speculative behaviour and bubble formation},
author = {Nicolas Cofre and Magdalena Mosionek-Schweda},
journal= {arXiv preprint arXiv:2311.12247},
year = {2023}
}