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arXiv · 2609.29701

Multi-Agent Debate for Explainable Trading: Reasoning, Consensus, and Performance in Simulated Markets

Juli Huang·Alanood Alrassan·Deveen Harischandra·Theodore Wu·Veljko Skarich·Matthew Hayes
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Abstract

Large language models (LLMs) are increasingly used for financial decision-making, yet it remains unclear whether improvements in reasoning quality translate into better economic outcomes. We investigate this question using a multi-agent debate framework for portfolio allocation in historical market simulations, where specialized agents propose, critique, and revise investment decisions. Reasoning quality is evaluated across four dimensions: logical validity, evidential support, alternative consideration, and causal alignment, and compared with downstream financial performance. Across 210 controlled runs, aggregate reasoning quality shows no meaningful relationship with Sharpe ratio (r = 0.07, p = 0.29) or total return (r = 0.03, p = 0.70). Structured prompting increases measured reasoning quality from about 0.72 to 0.84 (+17.7%, Cohen's d about 2.0), but these gains do not consistently translate into higher returns. We identify sycophantic convergence as a central failure mode, where agents abandon independent positions during critique-revision cycles and converge toward similar allocations. A Jensen-Shannon divergence intervention that preserves disagreement improves Sharpe by +0.14 (p = 0.028) and Sortino by +0.25 (p = 0.026), while interventions enforcing stronger causal reasoning do not improve financial performance. Our results suggest that multi-agent debate is most valuable when it preserves independent informational signals rather than simply improving measured reasoning quality.

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Juli Huang, Alanood Alrassan, Deveen Harischandra, Theodore Wu, Veljko Skarich, Matthew Hayes. 2026-08-31. Multi-Agent Debate for Explainable Trading: Reasoning, Consensus, and Performance in Simulated Markets. https://arxiv.org/abs/2609.29701

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