Gode and Sunder's (1993) results from using \zero-intelligence" (zi) traders, that act randomly within a structured market, appear to imply that convergence to the theoretical equilibrium price in continuous double-auction markets is determined more by market structure than by the intelligence of the traders in that market. However, it is demonstrated here that the average transaction prices of...

Agent-based simulations of financial markets have gained more and more acceptance among social scientists in the last decade, and the Santa Fe Artificial Stock Market (SFI-ASM) is a well-known one. We employed the Swarm and the concept of the MASS-Z to design the architecture of the MASS-S and implemented a multi-agent simulation system, called MASS-SF. In order to evaluate the system, we did f...

It is well known that among a community of traders in which particular pairs of traders only transact occasionally, and have opportunities to cheat, cooperation can be sustained if information about traders’ reputations can circulate within the group. In many applications, however, the potential for developing reputations is limited. This paper studies how intermediaries (“brokers”) can help to...

An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies based on the additional information. In this model market participants have access to a stream of noisy information concerning the future return of an asset, whe...

This paper studies a variety of forms of regret minimization as the criteria with which traders choose their bids/asks in a double auction. Unlike the expected utility maximizers that populate typical market models, these traders do not determine their actions using a single prior. The analysis proves that minimax regret traders will not converge to price-taking as the number of traders in the ...

Recent research has proposed several ways in which overcon"dent traders can persist in competition with rational traders. This paper o!ers an additional reason: overcon"dent traders do better than purely rational traders at exploiting mispricing caused by liquidity or noise traders. We examine both the static pro"tability of overcon"dent versus rational trading strategies, and the dynamic evolu...

We document economically large differences in the beforeand after-fee returns earned by speculative traders. We establish this result by focusing on day traders in Taiwan from 1992 to 2006. We argue that these traders are almost certainly speculative traders given their short holding period. We sort day traders based on their returns in year y and analyze their subsequent day trading performanc...

We find evidence for the disposition effect for buy strategies, but a reverse disposition effect for sell strategies, besides a dependence of the disposition effect on the investor sophistication. The disposition effect also depends strongly on the time horizon of a trading strategy. We develop a model in which informed traders with a behavioral bias and rational traders interact to generate th...

This paper shows that information effects per se are not responsible for the Gi®en goods anomaly affecting competitive traders’ demands in multi-asset, noisy rational expectations equilibrium models. The role that information plays in traders’ strategies also matters. In a market with risk averse, uninformed traders, informed agents have a dual motive for trading: speculation and market making....

We consider a dynamic model where traders in each period are matched randomly into pairs who then bargain about the division of a fixed surplus. When agreement is reached the traders leave the market. Traders who do not come to an agreement return next period in which they will be matched again, as long as their deadline has not expired yet. New traders enter exogenously in each period. We assu...