Information Dissemination and Aggregation in Asset Markets with Simple Intelligent Traders

Various studies of asset markets have shown that traders are capable of learning and transmitting information through prices in many situations. In this paper we replace human traders with intelligent software agents in a series of simulated markets. Using these simple learning agents, we are able to replicate several features of the experiments with human subjects, regarding #1# dissemination of information from informed to uninformed traders, and #2# aggregation of information spread over di#erent traders. Copyright c # Massachusetts Institute of Technology, 1998 This report describes research done within the Center for Biological and Computational Learning in the Department of Brain and Cognitive Sciences at the Massachusetts Institute of Technology. This research is sponsored by a grant from the National Science Foundation under contract ASC-9217041. 1 Introduction Experimental asset markets have yielded many results on the properties of #nancial markets, and their abiliti..