Institute of Information Theory and Automation

Publication details

How do skilled traders change the structure of the market

Journal Article

Vácha Lukáš, Baruník Jozef, Vošvrda Miloslav

serial: International Review of Financial Analysis vol.23, 1 (2012), p. 66-71

research: CEZ:AV0Z10750506

project(s): GAP402/10/0956, GA ČR, GP402/08/P207, GA ČR, GA402/09/0965, GA ČR

keywords: Heterogeneous agent model, Market structure, Skilled traders, Hurst exponent

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abstract (eng):

We extend the original heterogeneous agent model of Brock and Hommes (1998) by introducing the concept of skilled traders. The idea of skilled traders is based on the endeavor of market agents to estimate future price movements. We distinguish between the three groups of skilled traders according to their trading strategies. The first group consists of skilled traders who estimate the trend parameter and have randomly generated bias. The second group has fixed bias to zero, and the third group, most advanced one, is able to estimate the bias parameter. The most interesting result from simulations is that for all model settings the stock market changes its structure at some point with growing number of skilled traders.


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Last modification: 21.12.2012
Institute of Information Theory and Automation