Re: [Swarm-Modelling] parsimony and usage

[Marcus G. Daniels]

Marcus Daniels wrote:
> This practice of trading I describe would consider micro-ecologies with
> local inefficiencies using a potentially wide area of variables (and
> brute force) whereas what Doyne is interested in is more about
> predicting global, or scale free price phenomena from simple aggregate
> indicators. 
glen e. p. ropella wrote:
> If, however, the devil is in the details and abstraction prevents prediction
> (which is often the case in even the most simple complex systems), then the more
> parsimonious description is not the best. 
>   
What a useful prediction is depends on the kind of person asking.   The 
explanation scientists typically seek are universal properties of a 
system.  One dogma is that the markets are forced to be efficient.   
Plenty of evidence that's not strictly true, but at least there seems to 
be pressure in that direction.   Assuming there is a fair amount of 
pressure, the task of making money then becomes one of finding temporary 
inefficiencies that can be predicted and exploited through careful 
observation and modeling of a particular neighborhood of a huge 
system.   Agents are one possible way to do this kind of localized 
observation and modeling, but not the only way.  

Also note the tremendous size of a system like the NYSE.   More than 
five trillion dollars have traded on the NYSE this year.   This makes 
the individual trader look more like a gas particle than a part of a 
mesoscopic system.
Sure there will be larger players that have billions at stake in single 
decisions (who often try very hard to be invisible), but much volume 
will be aggregated by ECNs too (Ameritrade, ETrade, etc.)