The effects of periodic and continuous market environments on the performance of trading agents

S. Chaggar, J. Noble, DT Cliff

Research output: Chapter in Book/Report/Conference proceedingConference Contribution (Conference Proceeding)

4 Citations (Scopus)

Abstract

Simulation experiments are conducted on simple continuous double auction (CDA) markets based on the experimental economics work of Vernon Smith. CDA models within experimental economics usually consist of a sequence of discrete trading periods or “days”, with allocations of stock and currency replenished at the start of each day, a situation we call “periodic” replenishment. In our experiments we look at both periodic and continuous-replenishment versions of the CDA. In this we build on the work of Cliff and Preist (2001) with human subjects, but we replace human traders with Zero Intelligence Plus (ZIP) trading agents, a minimal algorithm that can produce equilibrating market behaviour in CDA models. Our results indicate that continuous-replenishment (CR) CDA markets are similar to conventional periodic CDA markets in their ability to show equilibration dynamics. Secondly we show that although both models produce the same behaviour of price formation, they are different playing fields, as periodic markets are more efficient over time than their continuous counterparts. We also find, however, that the volume of trade in periodic CDA markets is concentrated in the early period of each trading day, and the market is in this sense inefficient. We look at whether ZIP agents require different parameters for optimal behaviour in each market type, and find that this is indeed the case. Overall, our conclusions mirror earlier findings on the robustness of the CDA, but we stress that a CR-CDA marketplace equilibrates in a different way to a periodic one.
Translated title of the contributionThe effects of periodic and continuous market environments on the performance of trading agents
Original languageEnglish
Title of host publicationArtificial Life XI: Proceedings of the Eleventh International Conference on the Simulation and Synthesis of Living Systems
Pages110 - 117
Publication statusPublished - 2008

Bibliographical note

Conference Organiser: MIT Press, Cambridge, MA

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