A Brief Review of Recent Artificial Market Simulation (Agent-Based Model) Studies for Financial Market Regulations and/or Rules
10 Pages Posted: 4 Jan 2016 Last revised: 19 Apr 2021
Date Written: January 4, 2016
It is very difficult to discuss about changing financial market regulations and/or rules by only using results of empirical studies. An artificial market, which is a kind of an agent-based model, can isolate the pure contribution of changing the regulations to the price formation and can treat situations that have never occurred. These are strong points of the artificial market simulation study. Recently, some artificial market studies contributed to discussion what financial regulations and rules should be, for example, price variation limits and short selling regulation whether preventing bubbles and crushes or not, tick size, usage rate of dark pools, rules for investment diversification, speed of order matching systems on financial exchanges, frequent batch auctions, how active funds that trade infrequently make a market more efficient, an interaction between leveraged ETF markets and underlying markets and micro-foundation of price variation model using intelligence of artificial market simulation studies:
I will review those studies.
Keywords: Artificial Market Simulation, Multi-Agent Model, Agent-Based Model, Financial Market Regulation
JEL Classification: G1, G18
Suggested Citation: Suggested Citation