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Parrondo Strategies for Artificial Traders

Magnus Boman·Stefan Johansson·David Lyback
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Abstract

On markets with receding prices, artificial noise traders may consider alternatives to buy-and-hold. By simulating variations of the Parrondo strategy, using real data from the Swedish stock market, we produce first indications of a buy-low-sell-random Parrondo variation outperforming buy-and-hold. Subject to our assumptions, buy-low-sell-random also outperforms the traditional value and trend investor strategies. We measure the success of the Parrondo variations not only through their performance compared to other kinds of strategies, but also relative to varying levels of perfect information, received through messages within a multi-agent system of artificial traders.

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Magnus Boman, Stefan Johansson, David Lyback. 2002-04-26. Parrondo Strategies for Artificial Traders. https://arxiv.org/abs/cs/0204051

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