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| Stop-loss Strategy and Behavioral Cascade in the Asset Market |
| ZHANG Songming, LI Honggang
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| School of Systems Science, Beijing Normal University, Beijing 100875, China |
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Abstract In order to study the impact of stop-loss trading on traders′ behavior and asset prices in the market, this paper constructs a multi-agent market model with stop-loss strategy based on the method of agent-based computational finance. The model simulation results show that when the stop-loss threshold is touched in the market, it is easy to trigger continuous stop-loss trading, resulting in a behavioral cascade between traders. This kind of transaction cascading leads to an increase in the convergence of trader behavior, an imbalance between sell orders and buy orders in the market, an abnormal collapse in market prices and a liquidity black hole.
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Received: 05 September 2020
Published: 10 May 2021
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