Abstract
This article addresses the stock market as a complex system. The complexity of the stock market arises from the structure of the environment, agent heterogeneity, interactions among agents, and interactions with market regulators. We develop the idea of a meta-model, which is a model of models represented in an agent-based model that allows us to investigate this type of market complexity. The novelty of this article is the incorporation of various complexities captured by network theoretical models or induced by investment behavior. The model considers agents heterogeneous in terms of their strategies and investment behavior. Four investment strategies are included in the model: zero-intelligence, fundamental strategy, momentum (trend followers), and adaptive trading strategy using the artificial neural network algorithm. In terms of behavior, the agents can be risk averse or loss occupied with overconfidence or conservative biases. The agents may interact with each other by sharing market sentiments through a structured scale-free network. The market regulator controls the market through various control tools such as the risk-free rate and taxation. Parameters are calibrated to the S&P500. The calibration is implemented using a scatter search heuristic approach. The model is validated using various stylized facts of stock return patterns such as excess kurtosis, auto-correlation, and ARCH effect phenomena. Analysis at the macro and micro level of the market was performed by measuring the sensitivity of volatility and market capital and investigating the wealth distributions of the agents. We found that volatility is more sensitive to the model parameters than to market capital, and thus, the level of volatility does not affect market capital. In addition, the findings suggest that the efficient market hypothesis holds at the macro level but not at the micro level. (c) 2016 Wiley Periodicals, Inc. Complexity 21: 530-554, 2016