Investor structure and the price-volume relationship in a continuous double auction market: An agent-based modeling perspective
Authored by Wei Zhang, Zhengzheng Bi, Dehua Shen
Date Published: 2017
DOI: 10.1016/j.physa.2016.10.044
Sponsors:
Chinese National Natural Science Foundation
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Model Documentation:
Other Narrative
Mathematical description
Model Code URLs:
Model code not found
Abstract
This paper investigates the impact of investor structure on the
price-volume relationship by simulating a continuous double auction
market. Connected with the underlying mechanisms of the price-volume
relationship, i.e., the Mixture of Distribution Hypothesis (MDH) and the
Sequential Information Arrival Hypothesis (SIAH), the simulation results
show that: (1) there exists a strong lead-lag relationship between the
return volatility and trading volume when the number of informed
investors is close to the number of uninformed investors in the market;
(2) as more and more informed investors entering the market, the
lead-lag relationship becomes weaker and weaker, while the
contemporaneous relationship between the return volatility and trading
volume becomes more prominent; (3) when the informed investors are in
absolute majority, the market can achieve the new equilibrium
immediately. Therefore, we can conclude that the investor structure is a
key factor in affecting the price-volume relationship. (C) 2016 Elsevier
B.V. All rights reserved.
Tags
emergence
Long memory
Volatility
Stock returns
Impact
Financial-markets
Hypothesis
Information-flow
Agent-based
modeling
Ising-model
Investor structure
Price-volume relationship
Mdh
Siah
Continuous double auction market