As algorithmic or robot trading becomes more prevalent, stock markets may experience increased volatility and more frequent crashes. Circuit breakers which temporarily halt trading are considered a crucial component of stock markets, particularly in environments where robots and cybernetic avatars conduct transactions. But how effective are circuit breakers at stabilizing stock prices? Using forecast-based, non-linear regression models, we find that implementing a circuit breaker that suspends trading following a 7% or greater price decline is highly effective.

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Circuit Breakers for Stock Markets with Cybernetic Avatars

  • Tatsuma Wada

摘要

As algorithmic or robot trading becomes more prevalent, stock markets may experience increased volatility and more frequent crashes. Circuit breakers which temporarily halt trading are considered a crucial component of stock markets, particularly in environments where robots and cybernetic avatars conduct transactions. But how effective are circuit breakers at stabilizing stock prices? Using forecast-based, non-linear regression models, we find that implementing a circuit breaker that suspends trading following a 7% or greater price decline is highly effective.