On Patterns of Price Change in Speculation Game

Abstract

In this study, the statistics of price change patterns is investigated firstly in Speculation Game (an agent-based market model characterized with round-trip trades), then in several real financial instruments, and finally in two other representative market models. The occurrences of historical patterns from Speculation Game suggest that the speculative spirit of the market may be demonstrated as the significant deviation from the uniform frequency patterns. This implication can also be verified from the statistical results of those highly speculative assets, such as gold price and foreign exchange rates. Furthermore, it is found that the reproduction of such historical patterns requires a bottom-up modeling of the markets, as the price change patterns can hardly be achieved in stochastic process models.