Computational modeling of collective human behavior: The example of financial markets

Andy Kirou, Błazej Ruszczycki, Markus Walser, Neil F. Johnson

Research output: Chapter in Book/Report/Conference proceedingConference contribution

8 Scopus citations

Abstract

As a result of the increased availability of higher precision spatiotemporal datasets, coupled with the realization that most real-world human systems are complex, a new field of computational modeling is emerging in which the goal is to develop minimal models of collective human behavior which are consistent with the observed real-world dynamics in a wide range of systems. For example, in the field of finance, the fluctuations across a wide range of markets are known to exhibit certain generic stylized facts such as a non-Gaussian 'fat-tailed' distribution of price returns. In this paper, we illustrate how such minimal models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information but lack local information from their social network, and a model in which the traders form a dynamically evolving social network but lack any decision-making based on global information. We show that a combination of these two models - in other words, a population of virtual traders with access to both global and local information - produces results for the price return distribution which are closer to the reported stylized facts. Going further, we believe that this type of model can be applied across a wide range of systems in which collective human activity is observed.

Original languageEnglish (US)
Title of host publicationComputational Science - ICCS 2008 - 8th International Conference, Proceedings
Pages33-41
Number of pages9
EditionPART 1
DOIs
StatePublished - Jul 28 2008
Event8th International Conference on Computational Science, ICCS 2008 - Krakow, Poland
Duration: Jun 23 2008Jun 25 2008

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
NumberPART 1
Volume5101 LNCS
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349

Other

Other8th International Conference on Computational Science, ICCS 2008
CountryPoland
CityKrakow
Period6/23/086/25/08

Keywords

  • Collective behavior
  • Complex systems
  • Socio-economic systems
  • Virtual traders

ASJC Scopus subject areas

  • Theoretical Computer Science
  • Computer Science(all)

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    Kirou, A., Ruszczycki, B., Walser, M., & Johnson, N. F. (2008). Computational modeling of collective human behavior: The example of financial markets. In Computational Science - ICCS 2008 - 8th International Conference, Proceedings (PART 1 ed., pp. 33-41). (Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics); Vol. 5101 LNCS, No. PART 1). https://doi.org/10.1007/978-3-540-69384-0_8