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From: | Pietro Terna |
Subject: | Re: [Swarm-Modelling] [Fwd: Re: [ABMs in finance] |
Date: | Tue, 25 Apr 2006 22:57:59 +0200 |
At 18.35 21/04/2006, you wrote:
Steve Railsback wrote:-------- Original Message -------- Subject: Re: [Swarmfest2006] Keynote speakers Date: Fri, 21 Apr 2006 09:09:16 -0600 From: Marcus G. Daniels <address@hidden> Btw, the idea of using ABM as tool actually trading seems potentially useful. The idea would be to identify a network of traders (e.g. a number of large companies like Goldman Sachs, Merill Lynch, etc.) that would tend to show large back and forth trading patterns that would move the price in the short term. Then use data mining techniques (e.g. CART) to identify some likely decision variables, and then study that in detail and build an ABM of the players reactions dependent on theTo me, that's the essence of what ABM has to offer: a way to try to figure out the behaviors that produce a set of observed patterns. We ecologists think we have a difficult problem figuring out how fish and plants make decisions; imagine in finance where the agent behaviors could be as complex as these companies' automatic trading programs.But that's one reason Doyne's work, like the paper "Zero intelligence..." (http://www.santafe.edu/~jdf/papers/science2.pdf), is cool: it shows that you do not have to include all of this tremendous complexity to make a model that explains some important patterns. Some patterns seem to emerge just from the trading rules.
*********
As an outsider, I would think people in finance would be busy figuring out how much "realism" they need in agent behavior to make a useful (i.e., predictive enough to get rich) model of more and more complex patterns observed in the markets.Steve
I agree completely with ******** above. What is important is to avoid to hide individual behavior in aggregate equations, forgotting to evaluate the effects of the sequences of the events over the time. This is for me the core of the problem.
Then we can have minded or not minded agents, but this is a second level story ...
Pietro
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