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Novel Insights in the Levy-Levy-Solomon Agent-Based Economic Market Model

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Document pages: 22 pages

Abstract: The Levy-Levy-Solomon model (A microscopic model of the stock market: cycles,booms, and crashes, Economic Letters 45 (1))is one of the most influentialagent-based economic market models. In several publications this model has beendiscussed and analyzed. Especially Lux and Zschischang (Some new results on theLevy, Levy and Solomon microscopic stock market model, Physica A, 291(1-4))have shown that the model exhibits finite-size effects. In this study we extendexisting work in several directions. First, we show simulations which revealfinite-size effects of the model. Secondly, we shed light on the origin ofthese finite-size effects. Furthermore, we demonstrate the sensitivity of theLevy-Levy-Solomon model with respect to random numbers. Especially, we canconclude that a low-quality pseudo random number generator has a huge impact onthe simulation results. Finally, we study the impact of the stopping criteriain the market clearance mechanism of the Levy-Levy-Solomon model.

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