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.
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.