Simulation Driven Experimental Hypotheses and Design : A Study of Price Impact and Bubbles

During the last decades several financial market experiments have been conducted to investigate the price bubble formation mechanism and the impact of human behaviour on it. We extend well-established laboratory market models to the two-asset case, accounting at the same time for heterogeneous artificial traders with multi-asset strategies. Our main objective is to identify the role played in the price bubble formation by both self-market-impact (i.e., how trading orders affectthe price dynamics) and cross-market impact (i.e., the price changes in one asset caused by the trading activity on other assets). A crucial aspect of every experiment is the formulation of hypotheses, which must be stated a priori. To this end, we present a simulation based approach to generate synthetic data and formulate the hypotheses for our two-asset market experiment and calibrate its laboratory design