Theory of the Three-Group Evolutionary Minority Game

Chen, Kan; Wang, Bing–Hong; Yuan, Baozong

doi:10.1142/s0217979204025415

Cited by 4 publications

(3 citation statements)

References 8 publications

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“…In exploring the evolutionary dynamics of complex systems, a variety of game models have been introduced [18,19,20,21,22,23]. In modeling the evolutionary mechanism in financial systems, the minority game (MG) and its variant, the evolutionary minority game (EMG) [24,25,26,27,28,29], have become promising tools. In the financial markets, market impact, which measures an upward or a downward tendency of the prices subsequent to a trade buying or selling a given size, is a key factor for an agent to consider before he is ready for a shift in investment [30,31].…”

Section: Introductionmentioning

confidence: 99%

Self-organization and phase transition in financial markets with multiple choices

Liu

Huang

et al. 2014

Physica A: Statistical Mechanics and its Applications

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Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. It is found that the roles of market confidence are closely related to whether or not there exists another market. When there exists another investment opportunity, different market confidence may lead to the same price fluctuations and the same investment attainment. There are two feedback effects. Being overly optimistic about a particular asset makes an investor become insensitive to losses. A delayed strategy adjustment leads to a decline in wealth and one's runaway from the market. The withdrawal of the agents results in the optimization of the strategy distributions and an increase in wealth. Being overly pessimistic about a particular asset makes an investor over-sensitive to losses. One's too frequent strategy adjustment leads to a decline in wealth. The withdrawal of the agents results in the improvement of the market environment and an increase in wealth.

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Section: Introductionmentioning

confidence: 99%

Self-organization and phase transition in financial markets with multiple choices

Liu

Huang

et al. 2014

Physica A: Statistical Mechanics and its Applications

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“…To have a deep understanding of the evolutionary dynamics in financial markets, some agent-based models have been introduced in modeling the strategic interactions between the investors [20,21,22]. Among them, the minority game (MG) provides us a simple yet effective way to model the evolution of stock prices [23,24,25,26]. In the MG, the evolutionary mechanism is determined by two main factors: the global information and the individual strategy.…”

Section: Introductionmentioning

confidence: 99%

Coupled effects of market impact and asymmetric sensitivity in financial markets

Liu

Ren

et al. 2013

Physica A: Statistical Mechanics and its Applications

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By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the investors' global behavior are found to be closely related to the phase region they fall into. Within the region where the market impact is small, investors' asymmetric response to gains and losses leads to the occurrence of herd behavior, when all the investors are prone to behave similarly in an extreme way and large price fluctuations occur. A linear relation between the standard deviation of stock price changes and the mean value of strategies is found. With full market impact, the investors tend to self-segregate into opposing groups and the introduction of asymmetric sensitivity leads to the disappearance of dominant strategies. Compared with the situations in the stock market with little market impact, the stock price fluctuations are suppressed and an efficient market occurs. Theoretical analyses indicate that the mechanism of phase transition from clustering to self-segregation in the present model is similar to that in the majority-minority game and the occurrence and disappearance of efficient markets are related to the competition between the trend-following and the trend-aversion forces. The clustering of the strategies in the present model results from the majority-wins effect and the wealth-driven mechanism makes the market become predictable.

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“…Hod and Nakar generalized this to an asymmetric payoff structure, where the penalty for losing is greater than the reward for winning, and found the emergence of clustering of cautious agents [4]. Chen et al [5,6] derived a general formalism to understand the dynamical mechanism for the transition from segregation to clustering. They found that the effective rate of evolution plays an important role in determining the resulting steady-state population distribution.…”

Section: Introductionmentioning

confidence: 99%

Evolutionary dynamics and the phase structure of the minority game

Yuan

Chen

2004

Phys. Rev. E

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We show that a simple evolutionary scheme, when applied to the minority game (MG), changes the phase structure of the game. In this scheme each agent evolves individually whenever his wealth reaches the specified bankruptcy level, in contrast to the evolutionary schemes used in the previous works. We show that evolution greatly suppresses herding behavior, and it leads to better overall performance of the agents. Similar to the standard nonevolutionary MG, the dependence of the standard deviation sigma on the number of agents N and the memory length m can be characterized by a universal curve. We suggest a crowd-anticrowd theory for understanding the effect of evolution in the MG.

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Theory of the Three-Group Evolutionary Minority Game

Cited by 4 publications

References 8 publications

Self-organization and phase transition in financial markets with multiple choices

Self-organization and phase transition in financial markets with multiple choices

Coupled effects of market impact and asymmetric sensitivity in financial markets

Evolutionary dynamics and the phase structure of the minority game

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