Asset Prices, Traders' Behavior, and Market Design

The dynamics in a financial market with heterogeneous agents is analyzed under different market architectures. We start with a tractable behavioral model under Walrasian market clearing and simulate it under more realistic trading protocols. The key behavioral feature of the model is the switching of agents between simple forecasting rules on the basis of fitness measure. Analyzing the dynamics under order-driven protocols we show that behavioral and structural assumptions of the model are closely intertwined. High responsiveness of agents to a fitness measure causes excess volatility, however the frictions of the order-driven markets may stabilize the dynamics.

In-flight calibration of STEREO-B/WAVES antenna system

The STEREO/WAVES (SWAVES) experiment on board the two STEREO spacecraft (Solar Terrestrial Relations Observatory) launched on 25 October 2006 is dedicated to the measurement of the radio spectrum at frequencies between a few kilohertz and 16 MHz. The SWAVES antenna system consists of 6 m long orthogonal monopoles designed to measure the electric component of the radio waves. With this configuration direction finding of radio sources and polarimetry (analysis of the polarization state) of incident radio waves is possible. For the evaluation of the SWAVES data the receiving properties of the antennas, distorted by the radiation coupling with the spacecraft body and other onboard devices, have to be known accurately. In the present context, these properties are described by the antenna effective length vectors. We present the results of an in-flight calibration of the SWAVES antennas using the observations of the nonthermal terrestrial auroral kilometric radiation (AKR) during STEREO roll maneuvers in an early stage of the mission. A least squares method combined with a genetic algorithm was applied to find the effective length vectors of the STEREO Behind (STEREO-B)/WAVES antennas in a quasi-static frequency range ($L_{antenna} \ll \lambda_{wave}$) which fit best to the model and observed AKR intensity profiles. The obtained results confirm the former SWAVES antenna analysis by rheometry and numerical simulations. A final set of antenna parameters is recommended as a basis for evaluations of the SWAVES data

The marginally stable Bethe lattice spin glass revisited

Bethe lattice spins glasses are supposed to be marginally stable, i.e. their equilibrium probability distribution changes discontinuously when we add an external perturbation. So far the problem of a spin glass on a Bethe lattice has been studied only using an approximation where marginally stability is not present, which is wrong in the spin glass phase. Because of some technical difficulties, attempts at deriving a marginally stable solution have been confined to some perturbative regimes, high connectivity lattices or temperature close to the critical temperature. Using the cavity method, we propose a general non-perturbative approach to the Bethe lattice spin glass problem using approximations that should be hopeful consistent with marginal stability.Comment: 23 pages Revised version, hopefully clearer that the first one: six pages longe

Efficiency of Continuous Double Auctions under Individual Evolutionary Learning with Full or Limited Information

In this paper we explore how specific aspects of market transparency and agents' behavior affect the efficiency of the market outcome. In particular, we are interested whether learning behavior with and without information about actions of other participants improves market efficiency. We consider a simple market for a homogeneous good populated by buyers and sellers. The valuations of the buyers and the costs of the sellers are given exogenously. Agents are involved in consecutive trading sessions, which are organized as a continuous double auction with electronic book. Using Individual Evolutionary Learning agents submit price bids and offers, trying to learn the most profitable strategy by looking at their realized and counterfactual or "foregone" payoffs. We find that learning outcomes heavily depend on information treatments. Under full information about actions of others, agents' orders tend to be similar, while under limited information agents tend to submit their valuations/costs. This behavioral outcome results in higher price volatility for the latter treatment. We also find that learning improves allocative efficiency when compared with to outcomes with Zero-Intelligent traders.

A unified stability property in spin glasses

Gibbs' measures in the Sherrington-Kirkpatrick type models satisfy two asymptotic stability properties, the Aizenman-Contucci stochastic stability and the Ghirlanda-Guerra identities, which play a fundamental role in our current understanding of these models. In this paper we show that one can combine these two properties very naturally into one unified stability property

Connecting the dots: Econometric methods for uncovering networks with an application to the Australian financial institutions

© 2015 Elsevier B.V. This paper connects variance-covariance estimation methods, Gaussian graphical models, and the growing literature on economic and financial networks. We construct the network using the concept of partial correlations which captures direct linear dependence between any two entities, conditional on dependence between all other entities. We relate the centrality measures of this network to shock propagation. The methodology is applied to construct the perceived network of publicly traded Australian banks and their connections to domestic economic sectors and international markets. We find strong links between the big four Australian banks, real estate and other sectors of the economy, and determine which entities play a central role in transmitting and absorbing the shocks