Is an investor stolen their profits by mimic investors? Investigated by an agent-based model

TL;DR

This study uses an agent-based model to explore how increasing the number of mimic investors with similar strategies impacts market stability and individual profits, revealing that fundamental mimics stabilize prices and reduce profits, while technical mimics destabilize prices and increase profits.

Contribution

It introduces an extended agent-based financial market model with additional agents to analyze the effects of strategy mimicry on market dynamics and investor profits.

Findings

Increasing fundamental agents stabilizes prices and decreases profits.

Increasing technical agents destabilizes prices and increases profits.

Market stability is influenced by the composition of agent strategies.

Abstract

Some investors say increasing investors with the same strategy decreasing their profits per an investor. On the other hand, some investors using technical analysis used to use same strategy and parameters with other investors, and say that it is better. Those argues are conflicted each other because one argues using with same strategy decreases profits but another argues it increase profits. However, those arguments have not been investigated yet. In this study, the agent-based artificial financial market model(ABAFMM) was built by adding "additional agents"(AAs) that includes additional fundamental agents (AFAs) and additional technical agents (ATAs) to the prior model. The AFAs(ATAs) trade obeying simple fundamental(technical) strategy having only the one parameter. We investigated earnings of AAs when AAs increased. We found that in the case with increasing AFAs, market prices are made stable that leads to decrease their profits. In the case with increasing ATAs, market prices are made unstable that leads to gain their profits more.