Cycles, determinism and persistence in agent-based games and financial time-series. II

DOI10.1080/14697688.2012.670261MaRDI QIDQ2873535zbMATH OpenOpenAlexFDO

Authors J. B. Satinover, D. Sornette

Publication date 24 January 2014

Published in Quantitative Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0805.0428

zbMATH Keywords

agent-based modellinganomalies in pricescontrol and optimizationcross disciplinary problemseconophysicsquantitative trading strategies

Mathematics Subject Classification ID

Graphs and linear algebra (matrices, eigenvalues, etc.) (05C50) Games involving graphs (91A43) Economic time series analysis (91B84) Financial applications of other theories (91G80)

Abstract: The Minority Game (MG), the Majority Game (MAJG) and the Dollar Game ($G)areimportantandclosely-relatedversionsofmarket-entrygamesdesignedtomodeldifferentfeaturesofreal-worldfinancialmarkets.Inavariantofthesegames,agentsmeasuretheperformanceoftheiravailablestrategiesoverafixed-lengthrollingwindowofpriortime-steps.Thesearetheso-calledTimeHorizonMG/MAJG/$G (THMG, THMAJG, TH$$G (i.e., genuine control) may be understood on a cycle-by-cycle basis. The decomposition offers as well a new metric for comparing different game dynamics to real-world financial time-series and a method for generating predictors. We apply the cycle predictor a real-world market, with significantly positive returns for the latter.

Recommendations

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Cites work

• Illusion of control in time-horizon minority and Parrondo games
• Antipersistent binary time series
• Application of multi-agent games to the prediction of financial time series
• Dynamics of the time horizon minority game
• Markov chains in Banach spaces on cycles
• On the weak convergence of sequences of circuit processes: a probabilistic approach
• Orthogonal cycle transforms of stochastic matrices
• Properties of a simple bilinear stochastic model: Estimation and predictability

Cited in

(5)

• Cycles, determinism and persistence in agent-based games and financial time-series. I
• Decision trees unearth return sign predictability in the S\&P 500
• Application of multi-agent games to the prediction of financial time series
• On the preservation of deterministic cycles when some agents perceive them to be random fluctuations
• Illusion of control in time-horizon minority and Parrondo games

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