Virtual Stock Market software developed at NUI Galway will enable researchers to attempt to gain a better understanding of how financial markets operate.
It will also provide a platform with which they can conduct a series of experiments with both automated computer agents and humans. The aim is to understand the factors that underpin ‘boom-and-bust’ cycles, as well as human and software agents’ interactions.
The Virtual Stock Market is the result of a multi-disciplinary research collaboration between the JE Cairnes School of Business and Economics, the Digital Enterprise Research Institute (DERI) and the Computer Integrated Manufacturing Research Unit (CIMRU) at NUI Galway.
The Virtual Stock Market lists 10 companies and has four types of computer agents trading in the market. NUI Galway students have also been invited to trade on the stock market and each participant will be given an initial endowment of 10,000 Airgead (virtual currency) and an equivalent amount of shares.
Dr Srinivas Raghavendra, an economics lecturer at NUI Galway, Dr Laurentiu Vasiliu, a group leader at the DERI/CIMRU and PhD student Daniel Paraschiv from the CIMRU/DERI are behind the research.
Raghavendra said: ‘The main objective is to understand the processes that underlie the real-world financial markets. We believe that experiments with human agents could provide us with insights to further our understanding of the dynamics of financial markets.’
Human traders on the Virtual Stock Market are welcome to try out their own investment strategies, technical trading strategies or other hybrid strategies. The real-time data from the virtual market can be directly downloaded to a spreadsheet, which will allow participants to try out various technical trading rules.
Laurentiu added: ‘The DERI commercialisation team aims to move the concept forward towards a potential future professional stock-exchange testing environment, where novel strategies and financial products can be tested by interested financial houses.’
The results of experiments with the Virtual Stock Market will be presented in July to the Society for Computational Economics at the 15th International Conference on Computing in Economics and Finance in Sydney, Australia.