A multi-assets artificial stock market with zero-intelligence traders

¹ Physics Department, Politecnico di Torino - Corso Duca degli Abruzzi 24, I-10129 Torino, Italy, EU
² DIBE-CINEF, Università di Genova - Via Opera Pia 11a, I-16145 Genova, Italy, EU

^a linda.ponta@polito.it
^b raberto@dibe.unige.it
^c cincotti@dibe.unige.it

Received: 31 August 2010
Accepted: 4 January 2011

Abstract

In this paper, a multi-assets artificial financial market populated by zero-intelligence traders with finite financial resources is presented. The market is characterized by different types of stocks representing firms operating in different sectors of the economy. Zero-intelligence traders follow a random allocation strategy which is constrained by finite resources, past market volatility and allocation universe. Within this framework, stock price processes exhibit volatility clustering, fat-tailed distribution of returns and reversion to the mean. Moreover, the cross-correlations between returns of different stocks are studied using methods of random matrix theory. The probability distribution of eigenvalues of the cross-correlation matrix shows the presence of outliers, similar to those recently observed on real data for business sectors. It is worth noting that business sectors have been recovered in our framework without dividends as only consequence of random restrictions on the allocation universe of zero-intelligence traders. Furthermore, in the presence of dividend-paying stocks and in the case of cash inflow added to the market, the artificial stock market points out the same structural results obtained in the simulation without dividends. These results suggest a significative structural influence on statistical properties of multi-assets stock market.