Analyzing the Role of Noise Trader in Financial Markets through Agent-Based Modelling

Author

Takahashi, Hiroki

Author_Institution

Grad. Sch. of Bus. Adm., Keio Univ., Yokohama, Japan

fYear

2014

fDate

21-25 July 2014

Firstpage

444

Lastpage

449

Abstract

This article investigates the role of noise traders in financial markets by using an agent-based model. In this study, I analyze the market where various kinds of investors, including fundamentalists and investors who employ a passive investment strategy (which is one of the most popular investment strategies in the asset management business), are present. As a result of intensive experimentation, it was concluded that noise traders, such as investors who evaluate stock prices based on trends, averages, and latest prices, could contribute to the survival of fundamentalists and help to maintain market stability. These results are of both academic interest and practical use.

Keywords

financial data processing; investment; multi-agent systems; share prices; stock markets; agent-based modelling; asset management business; financial markets; market stability; noise trader; passive investment strategy; stock price evaluation; Computers; Conferences; Software; Agent-based modelling; Asset Management; Asset Pricing; Behavioral Economics; Finance; Financial Markets; Social Simulation;

fLanguage

English

Publisher

ieee

Conference_Titel

Computer Software and Applications Conference Workshops (COMPSACW), 2014 IEEE 38th International

Conference_Location

Vasteras

Type

conf

DOI

10.1109/COMPSACW.2014.75

Filename

6903170