The Impact Of Switching Strategies On The Stock Market With Agent

The behavior of switching strategies is widespread in the stock market and it also has a strong impact on the asset pricing.Therefore,a large literature have studied the impact of switching strategies on the stock market.However,the conclusions are opposite in different articles.Some find the switching behavior can reduce the market volatility,while others conclude that the switching behavior calms the market.The key to explain the phenomenon is to dig the characters of switching behavior deeper.The dissertation studies the impact of the switching behavior on the stock market with agent-based computational finance.The conclusion is that market condition is an important factor to influence the impact of switching behavior on the stock market. This paper constructs the switching model and tests the validity of our model.Futhur more the characters of switching behavior is studied by use of simulated data. Meanwhile, the robust analysis is discussed from the angle of trading frequency and tick size.volatility indicators and liquidity indicators to explain their impact of the switching behavior on the stock market.Finally we find the characters of switching behavior vary with different market condition.Therefore,the different switching behavior has different affects on the stock market.The main conclusions and innovations are as follows:A switching model is built with endogenous information cost and characters of switching behavior is anylized in this paper.When the market condition is stable,the switching traders trade with more limit orders and the swiching proportion is relatively low.To the contrary,the switching traders trade with more market orders and the switching proportion is relatively high when the market is volatile. The forecast price of traders with no informatin will decrease significantly ind a volatile market compared with a stable one.As a result,switching proportion will increase. Meanwhile, switching traders who have buy the information find there is a serious misprice in the stock market.They will trade with more market orders which is more liquid to correct the market price.The characters of switching behavior change with market conditions,as a result,the swtching behavior will have different impact on the market with different market conditions.Market volatility reduces with more switching traders and market liquidity is also better when the market is stable,so switching behavior will be a stabilizing factor in the market.However, proportions of switching and market order will increase dramatically when the market is volatile,which lead to illiquidity and more volatility of the market.As a result,switching behavior will bring more volatility.The innovations of this dissertation are as follows:The first one is that the switching model we build is more reasonable with endogenous information cost.Gould M. D.,Porter M. A.,Williams S(2013)point out that the settlement of information cost is exogenous now and future research of endogenous information cost is needed. The switching model is closer with real market with endogenous information cost.The second one is some literature find that switching behavior have different impact on the market under variant parameters,but they can`t explain the phenomenon.Meanwhile,they point out that future research about internal mechanism is needed.This paper analyze the characters of switching behavior and find order types and switching percentage are different with different market conditions,which lead to different impact of switching behavior on the market.In a word,this dissertation studies the characters of switching behavior under different market conditions and explain related empirical findings.In the meantime,our research perfect the theoretical basis about the internal mechanism of switching behavior on the stock market.