An Agent-Based Model for the Impact of Price Limit Changes on Market Quality

Xiong Xiong (), Jinchi Liu (), Zonghang Yang () and Jiatong Han
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Xiong Xiong: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China
Jinchi Liu: College of Management and Economics, Tianjin University, Tianjin 300072, P. R. China
Zonghang Yang: ��Shenzhen Stock Exchange, Shenzhen 518038, P. R. China
Jiatong Han: ��School of Finance, Tianjin University of Finance and Economics, Tianjin 300222, P. R. China

International Journal of Information Technology & Decision Making (IJITDM), 2022, vol. 21, issue 06, 1777-1795

Abstract: This paper constructs an artificial stock market, especially the description of Chinese stocks to form a benchmark model of this paper. Then, we examine the relationships between price limit changes and market quality in the Chinese stock market. We set up five boards in the model and adopt the current price limits of the A-share market. In terms of experimental design, this paper adjusts the price limit to explore the path of the reform of the price limit. We also cancel the price limit to explore the necessity of price limits in China’s A-share market. After simulations, the experimental results of this paper show that relaxing the price limit will improve market quality. When we adjust the price limit from 10% to 20%, market volatility increases slightly, market liquidity increases and market pricing efficiency improves. When we cancel the price limit, market volatility increases significantly, market liquidity increases and market pricing efficiency decreases significantly. Our study shows that it is necessary to implement the price limit policy in the Chinese market, and a moderate relaxation of the price range will improve the quality of the market.

Keywords: Price limit; agent-based model; market quality (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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DOI: 10.1142/S0219622022500286

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