Search

Finding strategies to profit from the stock markets is a topic of immense interest to both institutional and retail investors. Possible methods range from machine learning, time series prediction, and network science to game theory. Game theory is a useful mathematical tool to model the relationship between agents and the stocks. In this paper, we ask an important question: Why do some (non-optimal) traders end up winning despite alternating between losing stocks? Our empirical observations reveal that by using a switching strategy abstractly derived from the switching in Parrondo's paradox, we can demonstrate that losing stocks can be combined in a time-based switching scheme to achieve a winning outcome. This is akin to an automatic investment plan. Several stocks within a given time period are being analyzed. Our analysis may provide a descriptive explanation for why some traders end up winning despite switching between losing stocks. However, it is not the focus of this paper to provide any normative advice or support for switching between stocks. [ABSTRACT FROM AUTHOR]

Individuals can make choices for themselves that are beneficial or detrimental to the entire group. Consider two losing choices that some individuals have to make on behalf of the group. Is it possible that the losing choices combine to give a winning outcome? We show that it is possible through a variant of Parrondo's paradox—the preference aggregation Parrondo's paradox (PAPP). This new variant of Parrondo's paradox makes use of an aggregate rule that combines with a decision-making heuristic that can be applied to individuals or parts of the social group. The aim of this work is to discuss this PAPP framework and exemplify it on a social network. This work enhances existing research by constructing a feedback loop that allows individuals in the social network to adapt its behavior according to the outcome of the Parrondo's games played. [ABSTRACT FROM AUTHOR]

Background: Dormancy is widespread in nature, but while it can be an effective adaptive strategy in fluctuating environments, the dormant forms are costly due to the inability to breed and the relatively high energy consumption. We explore mathematical models of predator-prey systems, in order to assess whether dormancy can be an effective adaptive strategy to outcompete perennially active (PA) prey, even when both forms of the dormitive prey (active and dormant) are individually disadvantaged. Results: We develop a dynamic population model by introducing an additional dormitive prey population to the existing predator-prey model which can be active (active form) and enter dormancy (dormant form). In this model, both forms of the dormitive prey are individually at a disadvantage compared to the PA prey and thus would go extinct due to their low growth rate, energy waste on the production of dormant prey, and the inability of the latter to grow autonomously. However, the dormitive prey can paradoxically outcompete the PA prey with superior traits and even cause its extinction by alternating between the two losing strategies. We observed higher fitness of the dormitive prey in rich environments because a large predator population in a rich environment cannot be supported by the prey without adopting an evasive strategy, that is, dormancy. In such environments, populations experience large-scale fluctuations, which can be survived by dormitive but not by PA prey. Conclusion: We show that dormancy can be an effective adaptive strategy to outcompete superior prey, recapitulating the game-theoretic Parrondo's paradox, where two losing strategies combine to achieve a winning outcome. We suggest that the species with the ability to switch between the active and dormant forms can dominate communities via competitive exclusion. [ABSTRACT FROM AUTHOR]

Many predators produce dormant offspring to escape harsh environmental conditions, but the evolutionary stability of this adaptation has not been fully explored. Like seed banks in plants, dormancy provides a stable competitive advantage when seasonal variations occur, because the persistence of dormant forms under harsh conditions compensates for the increased cost of producing dormant offspring. However, dormancy also exists in environments with minimal abiotic variation—an observation not accounted for by existing theory. Here it is demonstrated that dormancy can out‐compete perennial activity under conditions of extensive prey density fluctuation caused by overpredation. It is shown that at a critical level of prey density fluctuations, dormancy becomes an evolutionarily stable strategy. This is interpreted as a manifestation of Parrondo's paradox: although neither the active nor dormant forms of a dormancy‐capable predator can individually out‐compete a perennially active predator, alternating between these two losing strategies can paradoxically result in a winning strategy. Parrondo's paradox may thus explain the widespread success of quiescent behavioral strategies such as dormancy, suggesting that dormancy emerges as a natural evolutionary response to the self‐destructive tendencies of overpredation and related biological phenomena. [ABSTRACT FROM AUTHOR]

We remark on Nelson and Masel's (2017, 2018) papers [Intercellular competition and the inevitability of multicellular aging, Proc. Natl. Acad. Sci. USA114 (2017) 12982–12987; Reply to Cheong et al.: Unicellular survival precludes Parrondo's paradox, Proc. Natl. Acad. Sci. USA115 (2018) E5260, https://doi.org/10.1073/pnas.1806709115 ], addressing the connection between the published work and the game-theoretic Parrondo's paradox. The Parrondo's paradox refers to the phenomenon of achieving winning outcomes by playing two losing games in a random or deterministic order, and is intimately related to flashing Brownian ratchets with applications in physics, engineering and biology. In this paper, we raise important considerations and intricacies pertaining to the paradox, for the benefit of future Parrondo-related research. [ABSTRACT FROM AUTHOR]

Abstract: Parrondo’s Paradox has gained a fair amount of attention due to it being counter-intuitive. Given two stochastic processes, both of which are losing in nature, it is possible to have an overall net increase in capital by periodically or randomly alternating between the two processes. In this paper, we analyze the paradox with a different approach, in which we start with one process and seek to derive its complementary process. We will also state the conditions required for this to occur. Possible applications of our results include the development of future models based on the paradox. [Copyright &y& Elsevier]