Price limits and volatility

Deb, Saikat Sovan, Kalev, Petko S. and Marisetty, Vijaya B. 2016, Price limits and volatility, Pacific-Basin finance journal, vol. In Press, pp. 1-15, doi: 10.1016/j.pacfin.2016.12.002.

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Title Price limits and volatility
Author(s) Deb, Saikat Sovan
Kalev, Petko S.
Marisetty, Vijaya B.
Journal name Pacific-Basin finance journal
Volume number In Press
Start page 1
End page 15
Total pages 15
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2016-11-28
ISSN 0927-538X
Keyword(s) price limit rules
permanent and transitory volatility
post limit hit day
propensity score matching
volatility spill over
Summary This study provides new evidence on efficacy of daily price limit rules. We propose use of propensity score matching techniques to reduce sample selection bias in widely used Kim and Rhee (1997). Using data from the Tokyo Stock Exchange over a period of 5. years from January 2001 to December 2005, this study shows that price limit rules work quite efficiently for lower limit hits as there is no evidence of volatility spill-over. We also find that daily price limits have differential effects on permanent and transitory components of daily volatility. Our study reports evidence of spill-over of permanent volatility. However, we find price limit successfully curbs the transitory volatility on the post limit hit days.
Language eng
DOI 10.1016/j.pacfin.2016.12.002
Field of Research 150201 Finance
1502 Banking, Finance And Investment
1501 Accounting, Auditing And Accountability
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Elsevier
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Document type: Journal Article
Collection: Department of Finance
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