@Article{macau_mods_00005991, author = {Demary, Markus}, title = {Transaction Taxes and Traders with Heterogeneous Investment Horizons in an Agent-Based Financial Market Model}, journal = {Economics}, year = {2010}, publisher = {Walter de Gruyter GmbH}, address = {Berlin; Kiel}, volume = {4}, number = {1}, keywords = {Agent-based models; financial market stability; regulation; financial Markets; technical analysis; fundamental analysis; transaction taxes}, abstract = {This agent-based financial market model is a generalization of the model of Westerhoff (The Use of Agent-Based Financial Market Models to Test the Effectiveness of Regulatory Policies) by traders who are allowed to have different investment horizons as introduced by Demary (Who Does a Currency Transaction Tax Harm More: Short-Term Speculators or Long-Term Investors?). Our research goals are, first, to study what consequences the introduction of heterogeneous investment horizons has for agent-based financial market models, and second, how effective transaction taxes are in stabilizing financial markets. Numerical simulations reveal that under sufficiently small tax rates traders abstain from short-term trading in favour of longer investment horizons. This change in behavior leads to less volatility and less mispricings. When the tax rate exceeds a certain threshold, however, mispricings increase as also found in Westerhoff (Heterogeneous Traders and the Tobin Tax and The Use of Agent-Based Financial MarketModels to Test the Effectiveness of Regulatory Policies). This emergent property is due to the fact that taxation reduces short-term fluctuations and causes longer lasting trends in the exchange rate. As a result, the longer term fundamentalist trading rule becomes unpopular in favor of the longer term trend-chasing rule.}, issn = {1864-6042}, doi = {10.5018/economics-ejournal.ja.2010-8}, url = {https://macau.uni-kiel.de/receive/macau_mods_00005991}, url = {https://doi.org/10.5018/economics-ejournal.ja.2010-8}, file = {:https://macau.uni-kiel.de/servlets/MCRFileNodeServlet/macau_derivate_00007453/10.5018_economics-ejournal.ja.2010-8.pdf:PDF}, language = {en} }