Abstract
This paper tries to find out the optimal price limit in a simulated continuous double auction (CDA) market. We firstly examine the effects of price limit on the performance of CDA market, such as the market efficiency, the price dispersion, the transaction volume, and the average transaction price. Then the evaluation of price limit is given according to multiple criteria chosen from the simulation results. The finding of this paper helps to answer the question what is the appropriate level of price limit in CDA markets, as well as in order-driven stock exchanges.
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