Behavioral Consistency Validation for LLM Agents: An Analysis of Trading-Style Switching through Stock-Market Simulation
This addresses the validity of LLM-based financial simulations for researchers and practitioners, but it is incremental as it builds on existing simulation frameworks by adding a new validation method.
The paper tackled the problem of validating whether LLM agents in stock market simulations behave consistently with real market participants, specifically by testing if their trading-style switching aligns with behavioral-finance theories, and found that recent LLMs' behavior is only partially consistent, highlighting gaps in alignment.
Recent works have increasingly applied Large Language Models (LLMs) as agents in financial stock market simulations to test if micro-level behaviors aggregate into macro-level phenomena. However, a crucial question arises: Do LLM agents' behaviors align with real market participants? This alignment is key to the validity of simulation results. To explore this, we select a financial stock market scenario to test behavioral consistency. Investors are typically classified as fundamental or technical traders, but most simulations fix strategies at initialization, failing to reflect real-world trading dynamics. In this work, we assess whether agents' strategy switching aligns with financial theory, providing a framework for this evaluation. We operationalize four behavioral-finance drivers-loss aversion, herding, wealth differentiation, and price misalignment-as personality traits set via prompting and stored long-term. In year-long simulations, agents process daily price-volume data, trade under a designated style, and reassess their strategy every 10 trading days. We introduce four alignment metrics and use Mann-Whitney U tests to compare agents' style-switching behavior with financial theory. Our results show that recent LLMs' switching behavior is only partially consistent with behavioral-finance theories, highlighting the need for further refinement in aligning agent behavior with financial theory.