Skip to content
All library documents

Adaptive Minority Games: When Trend Followers and Contrarians Dominate

Article arXiv papers · Author: A. De Martino et al.
Read the original

Summary

This document describes an extension of the minority game in which the market rewards contrarian strategies when it is far from efficiency and trend-following strategies when it is close to efficiency. The model links the relative success of each trading style to the market’s state rather than assuming that one approach always dominates.

Its reported result is a smooth transition from contrarian dominance to trend-follower dominance as conditions change. In the intermediate regime, the model produces non-Gaussian behavior, sustained trends, and bubbles. These are theoretical model findings, not evidence from live markets or a trading test. The brief description does not specify the model’s equations, parameter choices, or how its efficiency measure maps to real markets, so the results should be read as a conceptual account of adaptive strategy competition.

Key ideas

  • The model rewards contrarians when the market is far from efficiency and trend followers when it is close to efficiency.
  • Dominance shifts smoothly between the two strategy types as market conditions change.
  • The intermediate regime features non-Gaussian behavior, sustained trends, and bubbles.
  • The described findings come from a theoretical model, and the summary provides no live-market validation.

Tags

Trend followingMean reversionStatistics
Full text
# Generalized minority games with adaptive trend-followers and contrarians


# Generalized minority games with adaptive trend-followers and contrarians









We introduce a simple extension of the minority game in which the market rewards contrarian (resp. trend-following) strategies when it is far from (resp. close to) efficiency. The model displays a smooth crossover from a regime where contrarians dominate to one where trend-followers dominate. In the intermediate phase, the stationary state is characterized by non-Gaussian features as well as by the formation of sustained trends and bubbles.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.