The value of information in a multi-agent market model: the luck of the uninformed

Tóth, B, Scalas, E, Huber, J and Kirchler, M (2007) The value of information in a multi-agent market model: the luck of the uninformed. The European Physical Journal B - Condensed Matter, 55 (1). pp. 115-120. ISSN 1434-6028

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Abstract

We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic relationship of net returns of traders as a function of information levels, both in the experiments and in the simulations. Particularly, averagely informed traders perform worse than the non informed and only traders with high levels of information (insiders) are able to beat the market. The simulations and the experiments reproduce many stylized facts of stock markets, such as fast decay of autocorrelation of returns, volatility clustering and fat-tailed distribution of returns. These results have an important message for everyday life. They can give a possible explanation why, on average, professional fund managers perform worse than the market index.

Item Type: Article
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Subjects: Q Science > QA Mathematics > QA0276 Mathematical statistics
Depositing User: Enrico Scalas
Date Deposited: 26 Sep 2014 08:26
Last Modified: 26 Sep 2014 08:26
URI: http://sro.sussex.ac.uk/id/eprint/50264
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