An empirical behavioral order‑driven model with price limit rules

We propose an empirical behavioral order-driven(EBOD)model with price limit rules,which consists of an order placement process and an order cancellation process.All the ingredients of the model are determined based on the empirical microscopic regularities in the order flows of stocks traded on the Shenzhen Stock Exchange.The model can reproduce the main stylized facts in real markets.Computational experiments unveil that asymmetric setting of price limits will cause the stock price to diverge exponentially when the up price limit is higher than the down price limit and to vanish vice versa.We also find that asymmetric price limits have little influence on the correlation structure of the return series and the volatility series,but cause remarkable changes in the average returns and the tail exponents of returns.Our EBOD model provides a suitable computational experiment platform for academics,market participants,and policy makers.

Heterogeneous Round-Trip Trading and the Emergence of Volatility Clustering in Speculation Game

This study is a detailed analysis of Speculation Game,a simple agent-based model of financial markets,in which the round-trip trading and the dynamic wealth evolution with variable trading volumes are implemented.Instead of herding behavior,the authors find that the heterogeneous holding periods in round-trip trades can contribute to the emergence of volatility clustering.In particular,the spontaneous redistribution of market wealth through repetitions of round-trip trades with non-uniform horizons can widen the wealth disparity and establish the Pareto distribution of the capital size.As a result,the intermittent placements of relatively big orders from endogenously emerged rich traders can bring on large fluctuations in price return.Empirical data are used to support the scenario derived from the model.