Flexible price limits: The case of Tokyo Stock Exchange
AbstractDaily price limits are criticized for their role in disrupting price adjustment process. We propose a flexible price limits mechanism as an alternative to daily price limit rules. First, we identify volatility spill-over and consecutive price limit hits as the source for disrupting informed trading. Later, we propose flexible price limits that can be implemented by using predicted probability of volatility spill-over and consecutive price limit hits. We provide empirical evidence in support of flexible price limits’ efficiency by using 5 years intra-day data of stocks listed on the Tokyo Stock Exchange.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.
Volume (Year): 24 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/intfin
Daily price limits; Volatility spill-over; Consecutive price limit hit;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G19 - Financial Economics - - General Financial Markets - - - Other
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