Empirical estimates on effects of price limits on stock prices (Taiwan, China).
详细信息
- 作者：Chung ; Jeff Jing-Sheng.
- 学历：Doctor
- 年：2000
- 导师：DeLong, J. Bradford
- 毕业院校：University of California
- 专业：Economics, Finance.
- ISBN：0599858664
- CBH：9979587
- Country：USA
- 语种：English
- FileSize：2670802
- Pages：92
文摘
Many organized commodities and stock exchanges limit the maximum price change within a trading session to a certain value. Do price limits have any effects on the price behavior of a stock? Previous studies of this issue either concentrate on recovering the equilibrium price series on limit-hitting days or compare the return series for periods immediately after limit-hitting events. In the effort to recover equilibrium prices, it is assumed that there is no effect of price limits. While when comparing the return series for periods immediately after limit-hitting ones with similar periods, it is often found that there exists a strong heating-up effect of price limits. It seems natural to suspect that there are some effect of price limits on limit-hitting days. The main purpose of this study is to estimate the effect of price limits on limit-hitting days. We do this in three different ways.;In the first approach, we model the daily returns using a mixture normal density. A regression model is derived using mixture density hypothesis. Another important method we use to derive a regression model to estimate effects of price limits on limit-hitting days comes from Wei and Chiang (1999) where one may estimate equilibrium returns (including the effect of price limits).;In the second approach, we explicitly assume a simple form of mixture normal density as the underlying return series. A maximum likelihood estimate of the effect of price limits is calculated for randomly selected five stocks.;In the third approach, we consider the behavior of the same stocks that are listed on both the home country exchanges and on exchanges abroad. The shares traded in one exchange are subject to price limit but not in another exchange. We can identify the effect of price limits using this difference in the trading regulations between these exchanges. Preliminary results, using four Taiwanese companies which are listed on the exchanges in United States and in Europe, in the form of either American Depository Receipts (ADR) or Global Depository Receipts (GDR) show that there is no effect of price limits for three out of four stocks we are studying.