DOI QR코드

DOI QR Code

Parrondo Paradox and Stock Investment

  • Received : 2012.02.21
  • Accepted : 2012.06.30
  • Published : 2012.08.31

Abstract

Parrondo paradox is a counter-intuitive phenomenon where two losing games can be combined to win or two winning games can be combined to lose. When we trade stocks with a history-dependent Parrondo game rule (where we buy and sell stocks based on recent investment outcomes) we found Parrondo paradox in stock trading. Using stock data of the KRX from 2008 to 2010, we analyzed the Parrondo paradoxical cases in the Korean stock market.

Keywords

References

  1. Abbott, D. (2010). Asymmetry and disorder: A decade of Parrondo's paradox, Fluctuation and Noise Letters, 129-156.
  2. Bishop, C. M. (1996). Neural Networks for Pattern Recognition, Oxford Press, Chapter 9, 346-349.
  3. Boman, M., Johansson, S. J. and Lyback, D. (2001). Parrondo strategies for artificial traders. In: Zhong, N., Liu, J., Ohsuga, S., and Bradshaw, J. (eds.) Intelligent Agent Technology: Research and Development, World Scientific, Singapore, 150-159.
  4. Di Crescenzo, A. (2007). A Parrondo paradox in reliability theory, Mathematical Scientist, 32, 17-22.
  5. Ethier, S. N. and Lee, J. (2009). Limit theorems for Parrondo's paradox, Electronic Journal of Probability, 14, 1827-1862. https://doi.org/10.1214/EJP.v14-684
  6. Ethier, S. N. and Lee, J. (2010). A Markovian slot machine and Parrondo's paradox, Annals of Applied Probability, 20, 1098-1125. https://doi.org/10.1214/09-AAP653
  7. Harmer, G. P. and Abbott, D. (2002). A review of Parrondo's paradox, Fluctuation and Noise Letters, R71-R107.
  8. Iyengar, R. and Kohli, R. (2004). Why Parrando's paradox is irrelevant for utility theory, stock buying, and the emergence of life, Essays & Commentaries, 20, 595-601.
  9. Kemeny, J. G. and Snell, J. L. (1960). Finite Markov Chains, D. Van Nostrand Company, Inc., Princeton, NJ.
  10. Key, E. S. (1987). Computable examples of the maximal Lyapunov exponent, Probability Theory and Related Fields, 75, 97-107. https://doi.org/10.1007/BF00320084
  11. Osipovitch, D. C., Barratt, C. and Schwartz, P. M. (2009). Systems chemistry and Parrondos paradox: Computational models of thermal cycling, New Journal of Chemistry, 33, 2022-2027. https://doi.org/10.1039/b900288j
  12. Parrondo, J. M. R., Harmer, G. P. and Abbott, D. (2000) New paradoxical games based on Brownian ratchets, Physical Review Letters, 85, 5226-5229. https://doi.org/10.1103/PhysRevLett.85.5226
  13. Pinsky, R. and Scheutzow, M. (1992). Some remarks and examples concerning the transient and recurrence of random diffusions, Annales de l'Institut Henri Poincare-Probabilites et Statistiques, 28, 519-536.
  14. Reed, F. (2007). Two-locus epistasis with sexually antagonistic selection: A genetic Parrondo's paradox, Genetics, 176, 1923-1929. https://doi.org/10.1534/genetics.106.069997
  15. Spurgin, R. and Tamarkin, M. (2005). Switching investments can be a bad idea when Parrondo's paradox applies, Journal of Behavioral Finance, 15-18.
  16. Stjernberg, F. (2007). Parrondo's paradox and epistemology when bad things happen to good cognizers (and conversely). In: Rnnow-Rasmussen, T. and Petersson, B., Josefsson, J., and Egonsson, D. (eds.) Hommage a Wlodek. Philosophical Papers Dedicated to Wlodek Rabinowicz.

Cited by

  1. Cooperative effect in space-dependent Parrondo games vol.25, pp.4, 2014, https://doi.org/10.7465/jkdi.2014.25.4.745
  2. Stock investment with a redistribution model of the history-dependent Parrondo game vol.26, pp.4, 2015, https://doi.org/10.7465/jkdi.2015.26.4.781
  3. A redistribution model of the history-dependent Parrondo game vol.26, pp.1, 2015, https://doi.org/10.7465/jkdi.2015.26.1.77
  4. Parrondo effect in correlated random walks with general jumps vol.27, pp.5, 2016, https://doi.org/10.7465/jkdi.2016.27.5.1241