Investigation and optimal designing of a price variation limit, a short sell regulation and an up-tick rule using by artificial market simulations

Abstract

We built an artificial market model and compared effects of price variation limits, short sell regulations and up-tick rules. In the case without the regulations, the price fell to below a fundamental value when economic bubble bursts occurred. On the other hand, in the case with the regulations, this over-shooting did not occur and the market was more effective. However, the short sell regulation and the up-tick rule caused the trading prices to be higher than the fundamental value. To summarize these points, the price variation limits have the potential to make the market more effective. We also surveyed an adequate limitation price range and an adequate limitation time span for the price variation limit and found a parameters' condition of the price variation limit to prevent the over-shoots. ©2013 The Institute of Electrical Engineers of Japan.