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Daily Price Limits and Destructive Market Behavior / Ting Chen, Zhenyu Gao, Jibao He, Wenxi Jiang, Wei Xiong.
- Format:
- Book
- Author/Creator:
- Chen, Ting.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24014.
- NBER working paper series no. w24014
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- We use account-level data from the Shenzhen Stock Exchange to show that daily price limits, a widely adopted market stabilization mechanism, may lead to unintended, destructive market behavior: large investors tend to buy on the day when a stock hits the 10% upper price limit and then sell on the next day; and their net buying on the limit-hitting day predicts stronger long-run price reversal. We also analyze a sample of special treatment (ST) stocks, which face tighter 5% daily price limits, and provide a causal validation from comparing market dynamics before and after they are assigned the ST status.
- Notes:
- Print version record
- November 2017.
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