Detection of Factors Influencing Market Liquidity Using an Agent-Based Simulation

  • Isao YagiEmail author
  • Yuji Masuda
  • Takanobu Mizuta


Recently, investors have become more interested in market liquidity, which is regarded as a measure of a booming financial market. When market liquidity is high, market participants are able to smoothly buy and sell their intended amount at a price close to the market mid-price. When discussing market liquidity in empirical studies, researchers have defined liquidity indicators that are consistent with their research objectives. However, it has not been clarified which market factors affect these indicators. In the present paper, we investigated which market factors affect major liquidity indicators, including Volume, Tightness, Resiliency, and Depth, using an artificial market, which is a type of agent-based simulation system. As a result, market liquidity based on Volume is completely opposite to market liquidity based on Tightness, Resiliency, or Depth. Moreover, we confirmed the price decline rate from the fundamental price and the price convergence periods to the fundamental price as a measure of the convergence speed, which is the original meaning of Resiliency, from the price level, which has been brought about by random price changes. Therefore, the trades of fundamentalists have the effect of shortening the convergence period, i.e., causing market liquidity to increase.



Note that the opinions expressed herein are solely those of the authors and do not necessarily reflect those of SPARX Asset Management Co., Ltd.


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© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  1. 1.Kanagawa Institute of TechnologyAtsugiJapan
  2. 2.SPARX Asset Management Co., Ltd.TokyoJapan

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