This paper appears in: Computational Intelligence for Financial Engineering (CIFEr), 1997., Proceedings of the IEEE/IAFE 1997
Publication Date: 23-25 Mar 1997
On page(s): 123-129
Meeting Date: 03/24/1997 - 03/25/1997
Location: New York City, NY, USA
ISBN: 0-7803-4133-3
References Cited: 5
INSPEC Accession Number: 5644620
Digital Object Identifier: 10.1109/CIFER.1997.618924
Posted online: 2002-08-06 20:59:55.0
Abstract
By exploring a two-dimensional parameter space, the paper
pinpoints the area where speculative trades can contribute to the
reduction of price volatility and are hence imperative for market
efficiency. This area is delimited by a rather restrictive financial
regulations imposed on an inherently unstable economy. Specifically,
depending on the associated financial regulations, the authors' GP-based
simulations of cobweb markets show that speculative trades may reduce
price volatility by 20% to 50% in an inherently unstable economy; on the
other hand they may also increase price volatility by 300% to 3000%. The
paper generalizes the earlier finding by Chen and Yeh (1997), which
basically shows that in an inherently stable economy, speculative trades
can only be destabilizing
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