Learning and adaptation's impact on market efficiency

Publisher:
Elsevier B.V.
Publication Type:
Journal Article
Citation:
Journal of Economic Behavior and Organization, 2010, 76 (3), pp. 635 - 653
Issue Date:
2010-01
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A dynamic model with learning and adaptation captures the evolution in trader beliefs and trading strategies. Through a process of learning and observation, traders improve their understanding of the market. Traders also engage in a process of adaptation by switching between trading strategies based on past performance. The asymptotic properties are derived analytically, demonstrating that convergence to efficiency depends on the model of adaptation.
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