Revisiting the issue of survivability and market efficiency with the Santa Fe Artificial Stock Market

摘要

The relevance of risk preference and forecasting accuracy for investor survival has recently been the focus of a series of theoretical and simulation studies. At one extreme, it has been proven that risk preference can be entirely irrelevant (Sandroni in Econometrica 68:1303-1341, 2000; Blume and Easley in Econometrica 74(4):929-966, 2006). However, the agent-based computational approach indicates that risk preference matters and can be more relevant for survivability than forecasting accuracy (Chen and Huang in Advances in natural computation, Springer, Berlin, 2005; J Econ Behav Organ 67(3):702-717, 2008; Huang in J Econ Interact Coord, 2015). Chen and Huang (Inf Sci 177(5):1222-1229, 2007, 2008) further explained that it is the saving behavior of traders that determines their survivability. However, institutional investors do not have to consider saving decisions that are the most influential investors in modern financial markets. Additionally, traders in the above series of theoretical and simulation studies have learned to forecast the stochastic process that determines which asset will pay dividends, not the market prices and dividends. To relate the research on survivability to issues with respect to the efficient markets hypothesis, it is better to endow agents with the ability to forecast market prices and dividends. With the Santa Fe Artificial Stock Market, where traders do not have to consider saving decisions and can learn to forecast both asset prices and dividends, we revisit the issue of survivability and market efficiency. We find that the main finding of Chen and Huang 2008 that risk preference is much more relevant for survivability than forecasting accuracy still holds for a wide range of market conditions but can fail when the baseline dividend becomes very small. Moreover, the advantage of traders who are less averse to risk is revealed in the market where saving decisions are not taken into account. Finally, Huang's (2015) argument regarding the degree of market inefficiency is confirmed.