Is more information better? The effect of traders' irrational behavior on an artificial stock market

This paper presents a computer simulated artificial stock market to examine market rationality issues. We construct economic agents with different degrees of irrationality to participate in the stock market. The agents replicate the irrational behaviors described in the psychology and finance literatures and determine the outcome of the market. The main focus of this study is to examine the two contradicting (efficient market versus noise trading) finance hypotheses in the presence of rational and irrational traders.