Dynamical Solution of the On-Line Minority Game

Abstract

We solve the dynamics of the on-line minority game, with general types of decision noise, using generating functional techniques a la De Dominicis and the temporal regularization procedure of Bedeaux et al. The result is a macroscopic dynamical theory in the form of closed equations for correlation- and response functions defined via an effective continuous-time single-trader process, which are exact in both the ergodic and in the non-ergodic regime of the minority game. Our solution also explains why, although one cannot formally truncate the Kramers-Moyal expansion of the process after the Fokker-Planck term, upon doing so one still finds the correct solution, that the previously proposed diffusion matrices for the Fokker-Planck term are incomplete, and how previously proposed approximations of the market volatility can be traced back to ergodicity assumptions.

25 pages LaTeX, no figures

References in corpus (2)

• Generating Functional Analysis of the Dynamics of the Batch Minority Game with Random External Information
• Broken ergodicity and memory in the minority game

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