Towards Evology: a Market Ecology Agent-Based Model of US Equity Mutual Funds II

Abstract

Agent-based models (ABMs) are fit to model heterogeneous, interacting systems like financial markets. We present the latest advances in Evology: a heterogeneous, empirically calibrated market ecology agent-based model of the US stock market. Prices emerge endogenously from the interactions of market participants with diverse investment behaviours and their reactions to fundamentals. This approach allows testing trading strategies while accounting for the interactions of this strategy with other market participants and conditions. Those early results encourage a closer association between ABMs and ML algorithms for testing and optimising investment strategies using machine learning algorithms.