Economic sociology: Using agent-based modeling to study financial markets

In this chapter, we explore how contemporary developments in financial markets necessitate new methodological approaches for their study. Specifically, as an increasing volume of buy and sell orders for financial assets are processed through complex automated trading systems operating anonymously, traditional qualitative approaches that have shaped key research strands within economic sociology are becoming less effective in capturing the dynamics of asset trading. We argue that agent-based modeling (ABM) offers a promising computational technique to address this challenge. Building on existing research that applies ABM to the study of financial markets, we present a semi-realistic simulation of portfolio management strategies being executed in the market.