We explore various extensions of Challet and Zhang’s Minority Game in an attempt to gain insight into the dynamics underlying financial markets. First we consider a heterogeneous population where individual traders employ differing ‘time horizons ’ when making predictions based on historical data. The resulting average winnings per trader is a highly non-linear function of the population’s composition. Second, we introduce a threshold confidence level among traders below which they will not trade. This can give rise to large fluctuations in the ‘volume ’ of market participants and the resulting market ‘price’. 1
To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.