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Effects of Linear Feedback Trading in an Interactive Market Model

Title data

Baumann, Michael Heinrich:
Effects of Linear Feedback Trading in an Interactive Market Model.
In: American Automatic Control Council in cooperation with IFAC (ed.): American Control Conference (ACC), 2015. - Chicago : IEEE , 2015 . - pp. 3880-3885
ISBN 978-1-4799-8685-9
DOI: https://doi.org/10.1109/ACC.2015.7171935

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PromotionsstipendiumNo information

Project financing: Bundesministerium für Bildung und Forschung
Hanns-Seidel-Stiftung

Abstract in another language

In the literature a lot of articles about so-called feedback-based trading strategies, i.e., strategies that compute investment exclusively from their own gain exist. Price is therein treated as a disturbance variable in the technical application. With these strategies, astonishing results may be shown. However, the so-called price taker property is always assumed, that means that one’s own trading does not affect the price, which is quite unrealistic. In the work at hand, an interactive and thus more realistic market model is introduced which is completely determined by the traders’ decisions. In this market model, distinct groups of traders can interact, e.g., feedback traders and noise traders, as they are considered to be relevant in economics in explaining real market prices. Furthermore, this interactive market model is a natural generalization of the geometric Brownian motion. Of course the model has to be bubble-prone to be realistic. The market model will be analyzed as well as the effects of linear feedback strategies and trading restrictions on the price. A way to calculate thresholds for the parameters to cause bubbles is provided. To conclude the work, backtesting on real market data is performed.

Further data

Item Type: Article in a book
Refereed: Yes
Keywords: linear feedback trading; interactive market model; noise traders; price taker property; Brownian motion; economics; investment; pricing
Institutions of the University: Faculties
Faculties > Faculty of Mathematics, Physics und Computer Science
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics
Faculties > Faculty of Mathematics, Physics und Computer Science > Department of Mathematics > Chair Mathematics V (Applied Mathematics)
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Profile Fields
Profile Fields > Advanced Fields
Profile Fields > Advanced Fields > Nonlinear Dynamics
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Research Institutions
Research Institutions > Research Centres
Result of work at the UBT: Yes
DDC Subjects: 500 Science > 510 Mathematics
Date Deposited: 16 Sep 2015 07:17
Last Modified: 15 Dec 2016 11:19
URI: https://eref.uni-bayreuth.de/id/eprint/19431

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