Time Series Properties of an Artificial Stock Market

A market of artificially intelligent traders is constructed to buy and sell a risky asset along with a risk free bond. Prices of the risky asset are determined endogenously from the interactions of the strategies which make trades and gather data. Each trader tries to learn about the world around it while enhancing its trading strategies. The primary purpose of this paper is to demonstrate that such a market replicates some of the basic empirical features of many asset markets including the persistence of volatility and trading volume, weak trends in prices, and leptokurtosis in returns. Also, for certain parameter values agents converge to a well defined rational expectations equilibrium