Coordination, intermittency and trends in generalized minority games

Abstract

The Minority Game framework was recently generalized to account for the possibility that agents adapt not only through strategy selection but also by diversifying their response according to the kind of dynamical regime, or the risk, they perceive. Here we study the effects of this mechanism in different information structures. We show that both the stationary macroscopic properties and the dynamical features depend strongly on whether the information supplied to the system is exogenous ('random') or endogenous ('real'). In particular, in the latter case one observes that a small amount of herding tendency suffices to alter the collective behavior dramatically. In such cases, the dynamics is characterized by the creation and destruction of trends, accompanied by intermittent features like volatility clustering.

Effects of payoff functions and preference distributions in an adaptive population

“…Recent attention was drawn to the role of the payoff function on reproducing realistic market behavior such as non-Gaussian features, the formation of sustained trends and bubbles, and intermittency [13,14]. Our study further confirms that tuning the payoff function and the preference distribution can lead to a rich spectrum of self- organized states of the market.…”

“…Bubbles, crashes and intermittent behaviors are also found in a similar extension of the MG [12]. A recent extension of the MG considers agents rewarding trend-following strategies when the winning margin is small, and rewarding contrarian ones otherwise [13,14]. As a result, non-Gaussian return distributions, sustained trends and bubbles are found, reminiscent of real markets.…”

Phenomenology of Minority Games in Efficient Regime

“…financial markets. At the moment, applications are more discussed by other authors [15,16,17,18]. Perhaps the most general mathematical description of MGs with real histories is given in ref.…”

Theory of agent-based market models with controlled levels of greed and anxiety

“…where the averages refer to the process (39,40). The correlation and response functions (12,13), the order parameters of our problem, are to be solved from (53), in which . .…”

“…One could argue that when markets are booming, equity prices tend to rise slowly and the trading volume increases (so agents are trend-followers, as in the majority game [10]), until the magnitude |A| of the overall market bid becomes too large, leading to turmoil and contrarian behaviour. This was the view of [11,12]. Alternatively, one could argue that for small |A| the market would be regarded as normal, and agents would seek advantage by contrarian trading, whereas large |A| would be regarded as anomalous, prompting panic-driven trend-following.…”