Heterogeneous information-based artificial stock market

In this paper, an information-based artificial stock market is considered. The market is populated by heterogeneous agents that are seen as nodes of a sparsely connected graph. Agents trade a risky asset in exchange for cash. Beside the amount of cash and of asset owned the the trader, each agent is characterized by a sentiment. Moreover, agents share their sentiments by means of interactions that are identified by the graph. Interactions are unidirectional and are supplied with different weights, depending on the class of the source agent. Agent’s trading decision is based on sentiment and, consequently, the stock price process depends on the propagation of information among the interacting agents, on budget constraints, and on market feedbacks. A central market maker (clearing house mechanism) determines the price process at the intersection of the demand and the supply curves. Both closed- and open-market conditions are considered. Results point out validity of the proposed model of information exchange among agents and yield helpful understanding of the role of information in real markets. Under closed market condition, the interaction among agents’ sentiments yields a price process that reproduces main stylized facts of real markets, i.e., fat tails of returns distributions and clustering of volatility. Within open-market conditions, i.e., with an external cash inflow that results in asset price inflation, also the unitary root stylised fact is reproduced by the artificial stock market. Finally, the effects of model parameters on the properties of the artificial stock market are also addressed.