Stylized facts of financial markets and market crashes in Minority Games

We present and study a Minority Game based model of a financial market wher e adaptive agents-the speculators-interact with deterministic agents-called producers. Speculators trade only if they detect predictable patterns whic h grant them a positive gain. Indeed the average number of active speculato rs grows with the amount of information that producers inject into the mark et. Transitions between equilibrium and out of equilibrium behavior are obs erved when the relative number of speculators to the complexity of informat ion or to the number of producers are changed. When the system is out of eq uilibrium, stylized facts arise, such as fat tailed distribution of returns and volatility clustering. Without speculators, the price follows a random walk; this implies that stylized facts arise because of the presence of sp eculators. Furthermore, if speculators abandon price taking behavior, styli zed facts disappear. (C) 2001 Elsevier Science B.V. All rights reserved.