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Influence of a wider trading range on stock price efficiency: Evidence from ChiNext stocks in China

Author

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  • Sun, Ping-Wen
  • Cai, Yingying

Abstract

We investigate the influence of widening ChiNext stocks’ daily price limit on stock price efficiency in China. Compared with Main Board stocks, following the adjustment in the price limit, ChiNext stocks immediately demonstrate increased price delay and idiosyncratic volatility, with reduced price synchronicity. These results indicate a more significant rise in firm-specific information production and slower assimilation of public information for ChiNext stocks. Although price delay and synchronicity effects fade after one and two years, idiosyncratic volatility effect remains notable. Our further analysis for the immediate influence reveals that, after this event, the liquidity component of price delay decreases more while the information uncertainty component of price delay increases more for ChiNext stocks than for Main Board stocks. Consequently, our findings suggest that heightened information uncertainty outweighs increased stock liquidity, leading to higher increases in stock price delay for ChiNext stocks than for Main Board stocks after the event.

Suggested Citation

  • Sun, Ping-Wen & Cai, Yingying, 2024. "Influence of a wider trading range on stock price efficiency: Evidence from ChiNext stocks in China," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:ecofin:v:70:y:2024:i:c:s1062940823001985
    DOI: 10.1016/j.najef.2023.102075
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