A comparison of different trading protocols in an agent-based market

We compare price dynamics of different market protocols (batch auction, continuous double auction and dealership) in an agent-based artificial exchange. In order to distinguish the effects of market architectures alone, we use a controlled environment where allocative and informational issues are neglected and agents do not optimize or learn. Hence, we rule out the possibility that the behavior of traders drives the price dynamics. Aiming to compare price stability and execution quality in broad sense, we analyze standard deviation, excess kurtosis, tail exponent of returns, volume, perceived gain by traders and bid-ask spread. Overall, a dealership market appears to be the best candidate, generating low volume and volatility, virtually no excess kurtosis and high perceived gain.     

Welfare migration in Europe

The enlargement of the European Union has increased concerns about the role of generous welfare transfers in attracting migrants. This paper explores the issue of welfare migration across the countries of the pre-enlargement European Union and finds a significant but small effect of the generosity of welfare on migration decisions. This effect, however, is still large enough to distort the distribution of migration flows and, possibly, offset the potential benefits of migration as an inflow of mobile labour into countries with traditionally immobile native workers.     

Unemployment duration and the interactions between unemployment insurance and social assistance

Existing studies suggest that reforms that reduce the generosity of the unemployment benefits should lower unemployment. Despite the large number of such reforms implemented in Europe in the past decades, evidence from various data sources shows very little correlation with the evolution of unemployment. This paper suggests that the scant success of these labour market reforms can be explained by the interactions between unemployment insurance and other social assistance programmes. Evidence from the European Community Household Panel shows that recipients of unemployment insurance who are also eligible for other welfare schemes are indeed less sensitive to changes in the level and the duration of their benefits.     

Dynamic patterns in similarity-based cooperation: an agent-based investigation

Understanding what motivates and fosters collective actions has major implications in the governance and management of organizations, in the regulation and design of public policies, and has long attracted the interests of scholars and practitioners in business and economics. This paper deals with how groups of agents emerge in a dynamic contest characterized by lack of formal structure and uncertainty regarding the possible individual outcomes, focusing on the features of the cooperators and on the dynamics emerging among them. Through the development of a stylized agent-based model we start by showing how similarity in values can be a successful driver for cooperation but are also able to highlight the limits of such process, by looking at how and how much agents cooperate with similar others. A second-version of the model, where memory of past interactions has a role, introduces further dynamics and is able to create successful and relatively stable groups.     

Fast traders and slow price adjustments: an artificial market with strategic interaction and transaction costs

Journal of Economic Interaction and Coordination - In this paper, we propose an artificial market to model high-frequency trading where fast traders use threshold rules strategically to issue...     

Efficient Monte Carlo pricing of European options¶using mean value control variates

We describe in this paper a variance reduction method based on control variates. The technique uses the fact that, if all stochastic assets but one are replaced in the payoff function by their mean, the resulting integral can most often be evaluated in closed form. We exploit this idea by applying the univariate payoff as control variate and develop a general Monte Carlo procedure, called Mean Monte Carlo (MMC). The method is then tested on a variety of multifactor options and compared to other Monte Carlo approaches or numerical techniques. The method is of easy and broad applicability and gives good results especially for low to medium dimension and in high volatility environments.     

Performance implications of active management of institutional mutual funds

We use information on institutional US mutual funds to examine the performance implications of the decisions they make when actively implementing their investment processes. Our findings show that the success of active fund managers' stock selection decisions is influenced both by the aggressiveness with which they implement their processes and also the style tilts incorporated into their active positions. Our findings provide useful insights into both where one might best look when choosing an active manager and also suggest possible profitable investment strategies.     

Employers' Search and the Efficiency of Matching

Unskilled workers in low productivity jobs typically experience higher labour turnover. This article shows how this finding is related to variation in the efficiency of the matching process across occupations. If employers find it less profitable to invest in search and screening activities when recruiting for low‐productivity jobs, matches at the lower end of the occupation distribution will be more prone to separation. The analysis of a unique sample of British hirings, containing detailed information about employers' recruitment practices, shows that more intensive recruitment leads to matches of better quality that pay higher wages, last longer and make employers more satisfied with the person taken on.     

The impact on the pricing process of costly active management and performance chasing clients

One of the necessary features of markets to produce efficient pricing is competition between information-based investors who quickly impound new information into price. However, a significant proportion of funds invested in today’s equity markets are in the hands of managers who pursue a style that utilises little or none of the available information. We simulate such a market where the funds are being managed using the following three investment styles: fundamental, momentum and index. We confirm that the major pricing anomalies that have been highlighted previously in the literature are a natural consequence of competition between managers utilising these three investment styles. More importantly, we show that this situation is unlikely to change as long as markets continue to be dominated by costly active managers with clients who pursue outperformance.     

Convergence of outcomes and evolution of strategic behavior in double auctions

We study the emergence of strategic behavior in double auctions with an equal number of buyers and sellers, under the distinct assumptions that orders are cleared simultaneously or asynchronously. The evolution of strategic behavior is modeled as a learning process driven by a genetic algorithm. We find that, as the size of the market grows, allocative inefficiency tends to zero and performance converges to the competitive outcome, regardless of the order-clearing rule. The main result concerns the evolution of strategic behavior as the size of the market gets larger. Under simultaneous order-clearing, only marginal traders learn to be price takers and make offers equal to their valuations/costs. Under asynchronous order-clearing, all intramarginal traders learn to be price makers and make offers equal to the competitive equilibrium price. The nature of the order-clearing rule affects in a fundamental way what kind of strategic behavior we should expect to emerge.