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Does the “uptick rule” stabilize the stock market? Insights from adaptive rational equilibrium dynamics

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  • Dercole, Fabio
  • Radi, Davide

Abstract

This paper investigates the effects of the “uptick rule” (a short selling regulation formally known as Exchange Act Rule 10a-1) by means of a simple stock market model, based on the ARED (adaptive rational equilibrium dynamics) modeling framework, where heterogeneous and adaptive beliefs on the future prices of a risky asset were first shown to be responsible for endogenous price fluctuations.

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  • Dercole, Fabio & Radi, Davide, 2020. "Does the “uptick rule” stabilize the stock market? Insights from adaptive rational equilibrium dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:chsofr:v:130:y:2020:i:c:s0960077919303625
    DOI: 10.1016/j.chaos.2019.109426
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    Cited by:

    1. Giovanni Campisi & Silvia Muzzioli & Fabio Tramontana, 2021. "Uncertainty about fundamental, pessimistic and overconfident traders: a piecewise-linear maps approach," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 707-726, December.
    2. Sarah Mignot & Fabio Tramontana & Frank Westerhoff, 2021. "Speculative asset price dynamics and wealth taxes," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(2), pages 641-667, December.
    3. Dieci, Roberto & Gardini, Laura & Westerhoff, Frank, 2022. "On the destabilizing nature of capital gains taxes," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Giovanni Campisi & Silvia Muzzioli & Fabio Tramontana, 2021. "Uncertainty about fundamental and pessimistic traders: a piecewise-linear maps approach," Department of Economics 0186, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".

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