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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.
Volume (Year): 24 (2013)
Issue (Month): C ()
Contact details of provider:
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
- Anand, Amber & Chakravarty, Sugato, 2007. "Stealth Trading in Options Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 167-187, March.
- Sugato Chakravarty, 2002.
"Stealth-Trading: Which Traders' Trades Move Stock Prices?,"
- Chakravarty, Sugato, 2001. "Stealth-trading: Which traders' trades move stock prices?," Journal of Financial Economics, Elsevier, vol. 61(2), pages 289-307, August.
- Kate Phylaktis & Manolis Kavussanos & Gikas Manalis, 1999. "Price Limits and Stock Market Volatility in the Athens Stock Exchange," European Financial Management, European Financial Management Association, vol. 5(1), pages 69-84.
- George, Thomas J. & Hwang, Chuan-Yang, 1995. "Transitory Price Changes and Price-Limit Rules: Evidence from the Tokyo Stock Exchange," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(02), pages 313-327, June.
- Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Miller, M.H., 1989. "Commentary: Volatility, Prices Resolution, And Effectiveness Of Price Limits," Papers t8, Columbia - Center for Futures Markets.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Lubos Pastor & Pietro Veronesi, 2002.
"Stock Valuation and Learning about Profitability,"
NBER Working Papers
8991, National Bureau of Economic Research, Inc.
- Deb, Saikat Sovan & Kalev, Petko S. & Marisetty, Vijaya B., 2010. "Are price limits really bad for equity markets?," Journal of Banking & Finance, Elsevier, vol. 34(10), pages 2462-2471, October.
- Kim, Kenneth & Rhee, S Ghon, 1997. " Price Limit Performance: Evidence from the Tokyo Stock Exchange," Journal of Finance, American Finance Association, vol. 52(2), pages 885-99, June.
- Recep Bildik & Selim Elekdag, 2004. "Effects of Price Limits on Volatility: Evidence from the Istanbul Stock Exchange," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(1), pages 5-34, January.
- Kang, Moonsoo, 2010. "Probability of information-based trading and the January effect," Journal of Banking & Finance, Elsevier, vol. 34(12), pages 2985-2994, December.
- Lehmann, B.N., 1989. "Commentary: Volatility, Price Resolution, And The Effectiveness Of Price Limits," Papers t9, Columbia - Center for Futures Markets.
- Li, Huimin & Zheng, Dazhi & Chen, Jun, 2014. "Effectiveness, cause and impact of price limit—Evidence from China's cross-listed stocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 217-241.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.