Connectivity, Information Jumps, and Market Stability: An Agent-Based Approach

We propose a metamodel to assess simulated market stability by introducing information connectivity in an agent-based network. The market is occupied by heterogeneous agents with different behaviors, strategies, and information connectivity. A jump-diffusion process simulating events that may occur...

Full description

Saved in:
Bibliographic Details
Published inComplexity (New York, N.Y.) Vol. 2017; no. 2017; pp. 1 - 16
Main Authors Khashanah, Khaldoun, Alsulaiman, Talal
Format Journal Article
LanguageEnglish
Published Cairo, Egypt Hindawi Publishing Corporation 01.01.2017
Hindawi
John Wiley & Sons, Inc
Hindawi Limited
Hindawi-Wiley
Subjects
Agent based models
Connectivity
Economic models
Economics
Handbooks
Hubs
Literature reviews
Marketing
Markets
Pricing
Researchers
Simulation
Social networks
Stability
Stability analysis
Stock exchanges
Volatility
United States
Online AccessGet full text

Cover

More Information
Summary:We propose a metamodel to assess simulated market stability by introducing information connectivity in an agent-based network. The market is occupied by heterogeneous agents with different behaviors, strategies, and information connectivity. A jump-diffusion process simulating events that may occur in the market is introduced. Agents information awareness varies along with agents propensity to respond to the information jump and jump size. A jump reshuffles market positions based on agents risk preferences determined by behavior and strategy. We examine the effect of information awareness on the volatility index of the simulated market in a scale-free market network. The analysis is performed by developing five experiments wherein the first one corresponds to systemic information ignorance state. Three experiments examine the role of hubs, normal agents, and hermits in the network when intermediate combinations of agent types have information awareness. The fifth experiment corresponds to the systemic information awareness with all agents being informed. The results show that the simulated market is driven to instability in a similar manner to patterns observed in a crisis where all agents become homogeneous in information awareness of events. Hubs contribute to increased connectivity and act as amplifiers of good, bad, or inaccurate information or sentiment.
ISSN:1076-2787
1099-0526
DOI:10.1155/2017/6752086