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Do price limits hurt the market?

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  • Chia-Hsuan Yeh

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  • Chun-Yi Yang

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    Abstract

    Under an artificial stock market composed of bounded-rational and heterogeneous traders, this paper examines whether or not price limits generate the negative effects on the market. Through testing the volatility spillover hypothesis, the delayed price discovery hypothesis, and the trading interference hypothesis, we find that no evidence of volatility spillover is observed. However, the phenomena of delayed price discovery and trading interference indeed exist, and their significance depends on the level of the price limits. Copyright Springer-Verlag Berlin Heidelberg 2013

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    File URL: http://hdl.handle.net/10.1007/s11403-012-0107-4
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Economic Interaction and Coordination.

    Volume (Year): 8 (2013)
    Issue (Month): 1 (April)
    Pages: 125-153

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    Handle: RePEc:spr:jeicoo:v:8:y:2013:i:1:p:125-153

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    Web page: http://www.springer.com/economics/economic+theory/journal/11403

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    Related research

    Keywords: Price limits; Artificial stock market; Agent-based modeling; Genetic programming; D83; D84; G11; G12;

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