Induced Minority Dynamics in a Stock Market Model

Yi Li; Robert Savit

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arXiv · nlin/0311055

Induced Minority Dynamics in a Stock Market Model

Yi Li·Robert Savit

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Abstract

In this paper, we present a simple stock market model (the market game) which incorporates, as ab initio dynamics delayed majority dynamics, according to which agents (with heterogeneous strategies and price expectations) are rewarded if their actions at time t are the actions of the majority of agents at time t+1. We observe that for a range of parameter settings, minority dynamics are dynamically induced in this game, despite the fact that they are not introduced ab initio. Central to the emergence of minority dynamics is the introduction of the notion of price expectations for the agents. This leads to the possibility of an agent not participating in the market for some time steps. One consequence of the induced minority dynamics is an effective reduction in market volatility. We also discuss the phase structure and qualitative behavior of the market game for the entire parameter space.

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Yi Li, Robert Savit. 2003-12-19. Induced Minority Dynamics in a Stock Market Model. https://arxiv.org/abs/nlin/0311055

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