Integrating and updating the stock market regulation: a significant approach to enhance the information efficiency of the stock market

Articles in Press

Document Type : Research Paper

Authors

1 1. University of Tehran, Department of Management, Kish International Campus, Kish Island, Islamic Republic of Iran 2.Lebanese International University, Department of Finance, Beirut, Lebanon.

2 university of Tehran, management faculty

3 University of Tehran, Department of Management

10.22059/ijms.2025.379692.676885

Abstract

This study investigates the potential for improving stock market efficiency through innovative and integrated regulatory measures. It examines the effects of three proposed measures: (1) requiring shareholders to agree on a unified stock valuation model for stock price setting, (2) encouraging long-term investment horizons, and (3) controlling the behaviors of short-term traders. Using a simulated stock market designed for a virtual company, along with a micro-survey, the study tests six hypotheses related to the impact of these measures on market efficiency. Findings indicate that adopting a unified stock valuation model significantly enhances information efficiency. Additionally, implementing a maturity tax alongside the unified model effectively extends shareholders' investment horizons. However, dynamic price limits, tied to the fair value derived from the unified model, show limited effectiveness in curbing speculative behaviors during market crashes. The study concludes that integrating and updating stock market regulations can improve information efficiency, offering valuable insights for regulators and policymakers, particularly in emerging markets. Limitations include the simulated environment's inability to fully replicate real-world market complexities, and relatively small sample sizes. Future research should incorporate larger and more diverse samples, extend simulation duration, and validate findings using additional data sources to strengthen the reliability of results.

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Interdisciplinary Journal of Management Studies

Articles in Press, Accepted Manuscript
Available Online from 04 May 2025

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