Agent-based Modeling Simulation Analysis on the Regulation of Institutional Investor's Encroachment Behavior in Stock Market
Abstract: This study explores
the effective regulation of institutional investor's encroachment behavior in
stock market. Given the theoretical and practical importance, the present study
examines the effect of the self-adaptive regulation strategy (adjusting the
regulation factors such as punishment and the probability of investigating
successfully in time) for the sake of the small & medium-sized investor
protection.
Design/methodology/approach: This study was carried out through game
theory and agent-based modeling simulation. Firstly, a dynamic game model was
built to search the core factors of regulation and the equilibrium paths.
Secondly, an agent-based modeling simulation model was built in Swarm to extend
the game model. Finally, a simulation experiment (using virtual parameter
values) was performed to examine the effect of regulation strategy obtained
form game model.
Findings: The results of this study showed that the core factors of
avoiding the institutional investor's encroachment behavior are the punishment
and the probability of investigating successfully of the regulator. The core
factors embody as the self-adaptability and the capability of regulator. If the
regulator can adjust the regulation factors in time, the illegal behaviors will
be avoided effectively.
Research limitations/implications: The simulation experiment in this
paper was performed with virtual parameter values. Although the results of experiment
showed the effect of self-adaptive regulation, there are still some differences
between simulation experiment and real market situation.
Originality/value: The purpose of this study is to investigate an
effective regulation strategy of institutional investor's encroachment behavior
in stock market in order to maintain market order and protect the benefits of
investors. Base on the game model and simulation model, a simulation experiment
was preformed and the result showed that the self-adaptive regulation would be
effective. This study applied game theory and agent-based modeling simulation
to the research of financial regulation, and extended the application field of
these two methods.
Author: Yang Li, Shuo Liu
Journal Code: jptindustrigg140055
