Journal
PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES OF THE UNITED STATES OF AMERICA
Volume 99, Issue -, Pages 7221-7228Publisher
NATL ACAD SCIENCES
DOI: 10.1073/pnas.082080399
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Recent work on adaptive systems for modeling financial markets is discussed. Financial markets are viewed as evolutionary systems between different, competing trading strategies. Agents are boundedly rational in the sense that they tend to follow strategies that have performed well, according to realized profits or accumulated wealth, in the recent past. Simple technical trading rules may survive evolutionary competition in a heterogeneous world where prices and beliefs co-evolve over time. Evolutionary models can explain important stylized facts, such as fat tails, clustered volatility, and long memory, of real financial series.
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