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Price Limits and Stock Market Volatility in China

Author

Listed:
  • Wang, Dingyan
  • Chong, Terence Tai-Leung
  • Chan, Wing Hong

Abstract

This paper explores the effects of price limits on the stock market of China during global market turmoils. The characteristics of stocks that hit the price limits more frequently under market turmoil are investigated. It is found that the price limit system increases volatility significantly during the downward price movement. Moreover, price limit delays the efficient price discovery for upward and downward price movements. Finally, actively-traded stocks with a higher positive correlation with the entire market in the property industry hit the price limits more frequently.

Suggested Citation

  • Wang, Dingyan & Chong, Terence Tai-Leung & Chan, Wing Hong, 2014. "Price Limits and Stock Market Volatility in China," MPRA Paper 54146, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54146
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    File URL: https://mpra.ub.uni-muenchen.de/54146/1/MPRA_paper_54146.pdf
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    References listed on IDEAS

    as
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    4. Huang, Yen-Sheng & Fu, Tze-Wei & Ke, Mei-Chu, 2001. "Daily price limits and stock price behavior: evidence from the Taiwan stock exchange," International Review of Economics & Finance, Elsevier, vol. 10(3), pages 263-288, July.
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    7. Ma, C.K. & Rao, R.P. & Sears, R.S., 1989. "Volatility, Price Resolution, And The Effectiveness Of Price Limits," Papers t7, Columbia - Center for Futures Markets.
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    More about this item

    Keywords

    A-share market; Price limit; Financial crises.;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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