Regulation Simulation

European Journal of Finance and Banking Research, Vol. 2, No. 2, pp.1-12, 2009

10 Pages Posted: 21 Jul 2009

See all articles by Philip Maymin

Philip Maymin

Fairfield University - Charles F. Dolan School of Business; Athletes Unlimited

Date Written: July 15, 2009

Abstract

A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate the effects of financial regulation that either pricks bubbles, props up crashes, or both. The results suggest that regulation makes the market process appear more Gaussian and less complex, with the difference more pronounced for more frequent intervention, though particular periods can be worse than the non-regulated version, and that pricking bubbles and propping up crashes are not symmetrical.

Keywords: determinism, complexity, regulation, bubbles, crashes

JEL Classification: G18, G01, G19

Suggested Citation

Maymin, Philip, Regulation Simulation (July 15, 2009). European Journal of Finance and Banking Research, Vol. 2, No. 2, pp.1-12, 2009, Available at SSRN: https://ssrn.com/abstract=1436963

Philip Maymin (Contact Author)

Fairfield University - Charles F. Dolan School of Business ( email )

N. Benson Road
Fairfield, CT 06824
United States

Athletes Unlimited ( email )

888 7th Avenue
New York, NY 10106
United States

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