Detecting the traders' strategies in Minority-Majority games and real stock-prices

In the Minority, Majority and Dollar Games (MG, MAJG, $G), synthetic agents compete for rewards, at each time-step acting in accord with the previously best-performing of their limited sets of strategies. Different components and/or aspects of real-world financial markets are modelled by these games. In the MG, agents compete for scarce resources; in the MAJG gents imitate the group in the hope of exploiting a trend; in the $G agents attempt to successfully predict and benefi...

The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties preventing it were multiple but the main two are being solved recently with the advent of modern computer technology: - massive detailed data on the individual market operations became available. - "microscopic simulations" of the stock...

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 i...

Motivated by recent empirical findings on the periodic phenomenon of aggregated market volumes in equity markets, we aim to understand the causes and consequences of periodic trading activities through a game-theoretic perspective, examining market interactions among different types of participants. Specifically, we introduce a new mean-field liquidation game involving major and minor traders, where the major trader evaluates her strategy against a periodic targeting strategy...

The purpose of this paper is to showcase trading strategies that give solutions to three difficult and intriguing problems in business finance, economics and statistics. The paper discusses trading strategies for both commodities and stocks but the main focus is on stock market trading at the New York Stock Exchange. Problem 1: Buy Low and Sell High. The buy low and sell high problem can be summarized like this: suppose the price of a commodity or stock fluctuates indefinit...

Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take decision since responding to market uncertainty needs a constant update of these strategies. For this purpose, we run a lab-in-the-field experiment where volunteers are given a controlled set of financial information -based on real data fro...

Hypothesis Testing Minority Game (HMG) is a variant of the standard Minority Game (MG) that models the inertial behavior of agents in the market. In the earlier study of our group, we find that agents cooperate better in HMG than in the standard MG when strategies are picked from the full strategy space. Here we continue to study the behavior of HMG when strategies are chosen from the maximal reduced strategy space. Surprisingly, we find that, unlike the standard MG, the leve...

We investigated distributions of short term price trends for high frequency stock market data. A number of trends as a function of their lengths was measured. We found that such a distribution does not fit to results following from an uncorrelated stochastic process. We proposed a simple model with a memory that gives a qualitative agreement with real data.

Human decision making by professionals trading daily in the stock market can be a daunting task. It includes decisions on whether to keep on investing or to exit a market subject to huge price swings, and how to price in news or rumors attributed to a specific stock. The question then arises how professional traders, who specialize in daily buying and selling large amounts of a given stock, know how to properly price a given stock on a given day? Here we introduce the idea th...

The search for more realistic modeling of financial time series reveals several stylized facts of real markets. In this work we focus on the multifractal properties found in price and index signals. Although the usual Minority Game (MG) models do not exhibit multifractality, we study here one of its variants that does. We show that the nonsynchronous MG models in the nonergodic phase is multifractal and in this sense, together with other stylized facts, constitute a better mo...