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Effectiveness of price limits: Evidence from China’s ChiNext market
Starting from August 24, 2020, the daily stock price limits in China’s ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China’s stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover,...
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Formato: | Online Artículo Texto |
Lenguaje: | English |
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Public Library of Science
2023
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Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10289463/ https://www.ncbi.nlm.nih.gov/pubmed/37352309 http://dx.doi.org/10.1371/journal.pone.0287548 |
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author | Qi, Bao |
author_facet | Qi, Bao |
author_sort | Qi, Bao |
collection | PubMed |
description | Starting from August 24, 2020, the daily stock price limits in China’s ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China’s stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China’s stock market. |
format | Online Article Text |
id | pubmed-10289463 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2023 |
publisher | Public Library of Science |
record_format | MEDLINE/PubMed |
spelling | pubmed-102894632023-06-24 Effectiveness of price limits: Evidence from China’s ChiNext market Qi, Bao PLoS One Research Article Starting from August 24, 2020, the daily stock price limits in China’s ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China’s stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China’s stock market. Public Library of Science 2023-06-23 /pmc/articles/PMC10289463/ /pubmed/37352309 http://dx.doi.org/10.1371/journal.pone.0287548 Text en © 2023 Bao Qi https://creativecommons.org/licenses/by/4.0/This is an open access article distributed under the terms of the Creative Commons Attribution License (https://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. |
spellingShingle | Research Article Qi, Bao Effectiveness of price limits: Evidence from China’s ChiNext market |
title | Effectiveness of price limits: Evidence from China’s ChiNext market |
title_full | Effectiveness of price limits: Evidence from China’s ChiNext market |
title_fullStr | Effectiveness of price limits: Evidence from China’s ChiNext market |
title_full_unstemmed | Effectiveness of price limits: Evidence from China’s ChiNext market |
title_short | Effectiveness of price limits: Evidence from China’s ChiNext market |
title_sort | effectiveness of price limits: evidence from china’s chinext market |
topic | Research Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10289463/ https://www.ncbi.nlm.nih.gov/pubmed/37352309 http://dx.doi.org/10.1371/journal.pone.0287548 |
work_keys_str_mv | AT qibao effectivenessofpricelimitsevidencefromchinaschinextmarket |