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Title: Diversity stability relationship in the artificial financial market
Authors: Nishigai, Shigetatsu
Advisors: Levin, Simon
Department: Ecology and Evolutionary Biology
Class Year: 2023
Abstract: Diversity is a central concept in ecology that leads to ecosystems' stability, but the idea has rarely been applied to other complex systems such as the financial market. Lots of causes, such as the excess leverage of trading strategy or sudden liquidation of a large position, are suggested to decrease the diversity of the financial market and make it fragile. However, it has not been investigated how we can quantify the diversity of trading strategies and how it leads to the stability of the financial market. Therefore, this research aims to build an agent-based model of the financial market to investigate how varying trading strategies can mitigate the volatility of asset prices. Our results suggest that having a trend follower that tracks longer trend would help decrease the volatility of the stock price, alleviating the pressure to the financial market.
Type of Material: Princeton University Senior Theses
Language: en
Appears in Collections:Ecology and Evolutionary Biology, 1992-2023

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