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Volatility spillover around price limits in an emerging market

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  • Aktas, Osman Ulas
  • Kryzanowski, Lawrence
  • Zhang, Jie

Abstract

The intraday volatility effects of price-limit hits for stocks in the BIST-50 index during a volatile period are examined. Our evidence supports the volatility no-effect, dampening and spillover hypotheses depending on whether the lower or upper price limit is hit and on when the hit begins and ends. Post-hit volatilities tend to be lower for limit hits near the beginning of the first trading session, unchanged for those that transcend a trading session and for upper price-limit hits near the end of either trading session, and higher for lower price-limit hits near the end of either trading session. These results are robust using samples differentiated by cross-listed status, same-day news, equi-distant and trade-by-trade returns and volatility measures accounting for return-series autocorrelations. Our findings have implications for emerging markets planning to impose price-limit bands or to increase their efficacy.

Suggested Citation

  • Aktas, Osman Ulas & Kryzanowski, Lawrence & Zhang, Jie, 2021. "Volatility spillover around price limits in an emerging market," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612319310888
    DOI: 10.1016/j.frl.2020.101610
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    Cited by:

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    2. Bing, Tao & Cui, Yian & Min, Ying & Xiong, Xiong, 2022. "Price limit changes and market quality: Evidence from China," Finance Research Letters, Elsevier, vol. 48(C).
    3. Zhang, Xiaotao & Wang, Ziqiao & Hao, Jing & He, Feng, 2022. "Price limit and stock market quality: Evidence from a quasi-natural experiment in the Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Price limits; Volatility spillover; Emerging stock market; Cross-listed; Same-day news;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G19 - Financial Economics - - General Financial Markets - - - Other

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