Decomposing Financial Market Dynamics via Mechanism Analysis in an Evolutionary Multi-Agent Simulation
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Abstract (arXiv)
Evolutionary agent-based markets (ABMs) couple several mechanisms -- who reproduces, how price forms, how biased the agents are, how consensus propagates -- yet these are usually fixed by convention, so it is unclear which mechanism controls which emergent property. In a coevolving, endogenous-price simulator with 120 heterogeneous behavioral agents, we make four mechanisms pluggable and run matched 3x20-seed interventions. We find the levers are largely separable. (1) Selection -> diversity: a Quality-Diversity (QD/MAP-Elites) operator robustly raises strategy-mix entropy over truncation top-k (paired Delta entropy +0.27 to +1.12 bits; sign-test p<0.001; CIs exclude 0) and sustains more strategy cycling (strongest in crisis: Delta=+0.070, p=0.0004). (2) Selection does not improve realism: even a per-agent realism reward that provably steers selection does not raise 5-fact realism (Delta_5=-0.11,-0.08,+0.03; not significant). (3) Microstructure -> realism: enabling reflexive price feedback does raise realism (Delta_5=+0.13,+0.20,+0.20; crisis/bull p<0.05, all CIs positive). (4) Behavior -> fragility: amplifying behavioral bias raises a genomic fragility proxy (Delta=+10.5,+11.1,+14.4; bull p<0.001, all CIs positive) while leaving realism flat. The remaining mechanism -- consensus network topology -- shows no robust effect (honest null). The contribution is a decomposition: in these single-mechanism sweeps the mechanisms behave as approximately distinct control knobs over diversity, realism, and fragility.
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