Abstrakt
Financial Ising model is one of the simplest agent-based models (building on a parallel between capital markets and the Ising model of ferromagnetism) mimicking the most important stylized facts of financial returns such as no serial correlation, fat tails, volatility clustering and volatility persistence on the verge of non-stationarity. We present results of Monte Carlo simulation study investigating the relationship between parameters of the model (related to herding and minority game behaviors) and crucial characteristics of capital market efficiency (with respect to the efficient market hypothesis).
We find a strongly non-linear relationship between these which opens possibilities for further research. Specifically, the existence of both herding and minority game behavior of market participants are necessary for attaining the efficient market in the sense of the efficient market hypothesis.