Market Ecology, Pareto Wealth Distribution and Leptokurtic Returns in Microscopic Simulation of the LLS Stock Market Model

摘要

The LLS stock market model is a model of heterogeneous quasi-rationalinvestors operating in a complex environment about which they have incompleteinformation. We review the main features of this model and several of itsextensions. We study the effects of investor heterogeneity and show thatpredation, competition, or symbiosis may occur between different investorpopulations. The dynamics of the LLS model lead to the empirically observedPareto wealth distribution. Many properties observed in actual markets appearas natural consequences of the LLS dynamics: truncated Levy distribution ofshort-term returns, excess volatility, a return autocorrelation "U-shape"pattern, and a positive correlation between volume and absolute returns.