Effectiveness of price limits: Evidence from China's ChiNext market
Starting from August 24, 2020, the daily stock price limits in China's ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China's stock market. We test four hypotheses about price limits: delayed price discovery, volatility s...
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| Veröffentlicht in: | PloS one 2023-06, Vol.18 (6), p.e0287548-e0287548 |
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| description | Starting from August 24, 2020, the daily stock price limits in China's ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China's stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China's stock market. |
| doi_str_mv | 10.1371/journal.pone.0287548 |
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We use this reform to study the effectiveness of price limits in China's stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China's stock market.</description><identifier>ISSN: 1932-6203</identifier><identifier>EISSN: 1932-6203</identifier><identifier>DOI: 10.1371/journal.pone.0287548</identifier><identifier>PMID: 37352309</identifier><language>eng</language><publisher>United States: Public Library of Science</publisher><subject>Capital markets ; China ; Commerce - methods ; Economic aspects ; Economic development ; Effectiveness ; Forecasts and trends ; Hypotheses ; Interference ; Investments ; Literature reviews ; Models, Economic ; New stock market listings ; Physical Sciences ; Prices ; Reforms ; Registration ; Research and Analysis Methods ; Securities industry ; Securities markets ; Securities trading ; Social Sciences ; Stock exchanges ; Stock markets ; Volatility</subject><ispartof>PloS one, 2023-06, Vol.18 (6), p.e0287548-e0287548</ispartof><rights>Copyright: © 2023 Bao Qi. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.</rights><rights>COPYRIGHT 2023 Public Library of Science</rights><rights>2023 Bao Qi. This is an open access article distributed under the terms of the Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ (the “License”), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.</rights><rights>2023 Bao Qi 2023 Bao Qi</rights><rights>2023 Bao Qi. This is an open access article distributed under the terms of the Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ (the “License”), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. 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We use this reform to study the effectiveness of price limits in China's stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. 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Academic</collection><collection>PubMed Central (Full Participant titles)</collection><collection>DOAJ Directory of Open Access Journals</collection><jtitle>PloS one</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Qi, Bao</au><au>Chia, Ricky Chee Jiun</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Effectiveness of price limits: Evidence from China's ChiNext market</atitle><jtitle>PloS one</jtitle><addtitle>PLoS One</addtitle><date>2023-06-23</date><risdate>2023</risdate><volume>18</volume><issue>6</issue><spage>e0287548</spage><epage>e0287548</epage><pages>e0287548-e0287548</pages><issn>1932-6203</issn><eissn>1932-6203</eissn><abstract>Starting from August 24, 2020, the daily stock price limits in China's ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China's stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China's stock market.</abstract><cop>United States</cop><pub>Public Library of Science</pub><pmid>37352309</pmid><doi>10.1371/journal.pone.0287548</doi><tpages>e0287548</tpages><orcidid>https://orcid.org/0009-0000-8944-0464</orcidid><oa>free_for_read</oa></addata></record> |
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| subjects | Capital markets China Commerce - methods Economic aspects Economic development Effectiveness Forecasts and trends Hypotheses Interference Investments Literature reviews Models, Economic New stock market listings Physical Sciences Prices Reforms Registration Research and Analysis Methods Securities industry Securities markets Securities trading Social Sciences Stock exchanges Stock markets Volatility |
| title | Effectiveness of price limits: Evidence from China's ChiNext market |
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