Interacting heterogeneous algo-traders : an extension of the Day and Huang model

2013

Masteroppgave i økonomi og administrasjon - Universitetet i Agder 2013 We develop a model with heterogeneous and socially interacting investors applying different technical trading rules (algorithms), by extending the seminal model of Day and Huang (1990). The original model consists of (sophisticated) -investors, (unsophisticated) -investors and a market maker. We have studied the nonlinearity features and described the dynamic behavior of the market. In the extended model, -investors are replaced by heterogeneous and socially integrated algo-traders. Through the communication process, each investor is able to obtain information about certain other investors and his characteristics (wealth…