2020/10/18 by Wen-Juan Xu, Chenyang Zhong, Xu, Wen-Juan +11
Biochemistry, Genetics and Molecular Biology · Economics, Econometrics and Finance · Social Sciences · #Adaptation and Self-Organizing Systems (nlin.AO) #Complex Systems and Time Series Analysis #Evolution and Genetic Dynamics #Evolutionary Game Theory and Cooperation #FOS: Economics and business #FOS: Physical sciences #General Finance (q-fin.GN) #Physics and Society (physics.soc-ph)
paper · pdf · doi:10.48550/arxiv.2010.08962
openalex publication_date 2020/10/18 · openalex created_date 2021/06/22 · openalex updated_date 2026/07/28
In nature and human societies, the effects of homogeneous and heterogeneous\ncharacteristics on the evolution of collective behaviors are quite different\nfrom each other. It is of great importance to understand the underlying\nmechanisms of the occurrence of such differences. By incorporating pair pattern\nstrategies and reference point strategies into an agent-based model, we have\ninvestigated the coupled effects of heterogeneous investment strategies and\nheterogeneous risk tolerance on price fluctuations. In the market flooded with\nthe investors with homogeneous investment strategies or homogeneous risk\ntolerance, large price fluctuations are easy to occur. In the market flooded\nwith the investors with heterogeneous investment strategies or heterogeneous\nrisk tolerance, the price fluctuations are suppressed. For a heterogeneous\npopulation, the coexistence of investors with pair pattern strategies and\nreference point strategies causes the price to have a slow fluctuation around a\ntypical equilibrium point and both a large price fluctuation and a no-trading\nstate are avoided, in which the pair pattern strategies push the system far\naway from the equilibrium while the reference point strategies pull the system\nback to the equilibrium. A theoretical analysis indicates that the evolutionary\ndynamics in the present model is governed by the competition between different\nstrategies. The strategy that causes large price fluctuations loses more while\nthe strategy that pulls the system back to the equilibrium gains more.\nOverfrequent trading does harm to one's pursuit for more wealth.\n