[Paper Review] Is an investor stolen their profits by mimic investors? Investigated by an agent-based model

Takanobu Mizuta, Isao Yagi|arXiv (Cornell University)|Mar 4, 2026

Complex Systems and Time Series Analysis0 citations

TL;DR

The paper extends an agent-based financial market model by adding additional agents (AFAs and ATAs) to study how increasing investors with the same strategy affects profits, finding that fundamentalist agents stabilize prices and reduce profits, while technical agents destabilize prices and increase profits.

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.

Motivation & Objective

• Motivate the investigation into how increasing investors sharing a strategy impacts profits.
• Extend an existing agent-based financial market model by adding AFAs and ATAs.
• Analyze how adding AFAs or ATAs affects market stability and individual profits.

Proposed method

• Use an exchange with a continuous double auction to determine prices.
• Define normal agents (NAs) who mix fundamental and technical expectations to place orders.
• Introduce Additional Agents (AAs): AFAs (fundamental strategy) and ATAs (technical strategy).
• AFAs trade based on a simple fundamental rule with one parameter and adjust holdings toward a fundamental price.
• ATAs trade based on a simple technical rule with one parameter (lookback ta) and adjust holdings based on price history.
• Run simulations varying the number of AFAs and ATAs to observe effects on price dynamics and AA profits.

Experimental results

Research questions

• RQ1 Does increasing AFAs stabilize market prices and reduceAA profits?
• RQ2 Does increasing ATAs destabilize market prices and increase AA profits?
• RQ3 What are the mechanisms by which AFAs and ATAs influence price formation and profitability?

Key findings

• Increasing AFAs leads to market stabilization and decreased profits for AAs.
• Increasing ATAs leads to market instability and increased profits for AAs.
• ATAs amplify price variation through positive feedback, boosting profits for ATAs as their share grows.
• AFAs create a negative feedback that pulls prices toward the fundamental value and reduces profits for AAs.
• When ATAs are added, more ATAs correlate with higher final profits and more trades once a threshold of AAs is surpassed.
• The price-stabilizing mechanism of AFAs contrasts with the price-accelerating mechanism of ATAs.