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Correlated adaptation of agents in a simple market: a statistical physics perspective 

Authors: J. P. Garrahan;  E. Moro; D. Sherrington
DOI: 10.1088/1469-7688/1/2/306
Publication Frequency: 8 issues per year
Published in: journal Quantitative Finance, Volume 1, Issue 2 February 2001 , pages 246 - 253
Formats available: PDF (English)
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Abstract

We discuss recent work in the study of a simple model for the collective behaviour of diverse speculative agents in an idealized stockmarket, considered from the perspective of the statistical physics of many-body systems. The only information about other agents available to any one is the total trade at time steps. Evidence is presented for correlated adaptation and phase transitions/crossovers in the global volatility of the system as a function of appropriate information scaling dimension. Stochastically controlled irrationality of individual agents is shown to be globally advantageous. We describe the derivation of the underlying effective stochastic differential equations which govern the dynamics, and make an interpretation of the results from the point of view of the statistical physics of disordered systems.
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