In real-world stock markets, certain chart patterns -- such as price declines near historical highs -- cannot be fully explained by fundamentals alone. These phenomena suggest the presence of path dependence in price formation, where investor decisions are influenced not only by current market conditions but also by the trajectory of prices leading up to the present. Path dependence has drawn attention in behavioral finance as a key mechanism behind such anomalies. One plausible driver of path dependence is human loss aversion, anchored to individual reference points like purchase prices or past peaks, which vary with personal context. However, capturing such subtle behavioral tendencies in traditional agent-based market simulations has remained a challenge. We propose the Fundamental-Chartist-LLM-Agent (FCLAgent), which uses large language models (LLMs) to emulate human-like trading decisions. In this framework, (1) buy/sell decisions are made by LLMs based on individual situations, while (2) order price and volume follow standard rule-based methods. Simulations show that FCLAgents reproduce path-dependent patterns that conventional agents fail to capture. Furthermore, an analysis of FCLAgents' behavior reveals that the reference points guiding loss aversion vary with market trajectories, highlighting the potential of LLM-based agents to model nuanced investor behavior.
Hashimoto et al. (Tue,) studied this question.