The Jacobs Levy Markowitz Simulator
Bruce I. Jacobs, Kenneth N. Levy, and Harry M. Markowitz

For original papers relating to the Jacobs Levy Markowitz Simulator (JLMSim), please see:

JLMSim is an asynchronous discrete-time simulator designed to model the stock market. It does so using five basic types of entities: securities, statisticians, portfolio analysts, investors, and traders. JLMSim determines prices and trading volumes of securities endogenously. Simulated statisticians provide return estimates, variances, and covariances. Ideal portfolio weights are determined by portfolio analysts who use the inputs from statisticians and investors' risk-aversion parameters and portfolio constraints. Prices and volume arise as traders seek to complete the desired trades to move investors' current portfolios toward their ideal portfolios. All investors are mean-variance investors who seek to maximize standard mean-variance utility, in which each investor has its own risk-aversion parameter.

JLMSim can operate in two modes. When the objective is to model the evolution of certain time-varying quantities—in this case, market prices and volumes—the simulator operates in the Dynamic Analysis (DA) mode. When the objective is to find the values of parameters such as equilibrium-implied expected returns for securities on the basis of the composition of the market portfolio and the preferences of market participants, the simulator operates in the Capital Market Equilibrium (CME) mode.

Using JLMSim is a three-step process.
  1. The user creates an input control file called JLMSimInput.txt in the same directory as the JLMSim program is located. This file can be created manually with a standard text file editor, using the supplied sample files as guides, or it can be created in a much more automated way using the JLMSim Input GUI as described in the Inputs section of this site.
  2. The user runs the JLMSim program, either manually from the Start menu using Start/Programs/JLMSim/MarketSimulator or automatically from the Input GUI by checking the box labeled "and run Simulator."
  3. The user inspects and analyzes the output files as described in the Outputs section of this site, or views a subset of the available data using the JLMSim Output GUI as described here.

The JLMSim installation package include sample input files corresponding to the cases described in the paper "Simulating Security Markets in Dynamic and Equilibrium Modes," by Bruce I. Jacobs, Kenneth N. Levy, and Harry M. Markowitz, Financial Analysts Journal, September/October 2010.


©2010 Jacobs Levy Equity Management