Price limits on a call auction market: Evidence from the Warsaw Stock Exchange

Henke, Harald; Voronkova, Svitlana

doi:10.1016/j.iref.2004.02.001

Cited by 23 publications

(18 citation statements)

References 31 publications

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“…First, increase volatility significantly after reaching the limits because it prevents large price changes and immediate corrections. This result is consistent with that of (Lehmannn, 1989;Phylaktis et al, 1999;Kim, 2001;Henke & Voronkova, 2005;Bildik & Gulay, 2006). Second, implementation of daily limits does interfere in trading operations.…”

Section: Resultssupporting

confidence: 91%

The Effect of Daily Stock Price Limits on the Investment Risk: Evidence from the Egyptian Stock Market

Abdelzaher¹,

Elgiziry²

2017

AFR

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The study aims to investigate the relationship between daily price limits and stock volatility, trading volume, delayed adjustment of stock prices, and its fair value. To achieve this goal, we used the data of the listed firms in EGX30. We analyzed the data using descriptive analysis then we applied General linear model, ARCH and GARCH models. Based on our analysis results show a positive relationship between upper daily limit and stock volatility, a positive relationship between daily price limits (upper limit-lower limit) and trading volume, a positive relationship between upper daily limit and the return between the closing price and the opening price on the same day, a positive relationship between lower daily limit and the return between the closing price and the opening price in the next day, a negative relationship between upper daily limit and the return between the closing price and the opening price in the next day, and a positive relationship between daily stock price limits and the fair value.

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Section: Resultssupporting

confidence: 91%

The Effect of Daily Stock Price Limits on the Investment Risk: Evidence from the Egyptian Stock Market

Abdelzaher¹,

Elgiziry²

2017

AFR

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“…2 A secondary reason for studying the KLSE is that we can examine price limit performance within a periodic call market. SeeHenke and Voronkova (2003) for an extreme example of this setting.…”

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confidence: 99%

Price limit performance: evidence from transactions data and the limit order book

Chan

Kim

Rhee

2005

Journal of Empirical Finance

101

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“…Since these theoretical arguments are ambiguous, it is not surprising that empirical findings on the effectiveness of the price limit reported in the literature are largely inconclusive. Price continuation has been evidenced by a positive return autocorrelation in the South Korean, Warsaw, Tokyo and Istanbul stock markets (for example, Lee and Chung, 1996;Henke and Voronkova, 2005;Bildik and Gulay, 2006). However, price reversals have also been documented by Huang (1998) for the Taiwan stock exchange and Farag (2015) for the Egyptian market.…”

Section: Introductionmentioning

confidence: 99%

“…Chen, Rui and Wang (2005) also report price reversals after lower price limit hits on the two Chinese stock exchanges. For volatility spillover analysis, the majority of the studies (for example, Chung, 1991;Chen, 1993;Kim and Rhee, 1997;Kim, 2001;Henke and Voronkova, 2005;Li, Zheng and Chen, 2014;Danişoğlu and Güner, 2018) show that stocks exhibit high volatility after price limits hits. However, some exceptions have been reported for the Chinese market (Chen, Rui and Wang, 2005;Kim, Liu and Yang, 2013), South Korean market (Lee and Kim, 1995;Berkman and Lee, 2002) and Japanese market (Deb, Kalev and Marisetty, 2017).…”

Section: Introductionmentioning

confidence: 99%

“…The main aim of this paper is to propose an extension to the existing models and thus contribute more reliable evidence to the price limit literature. Most 4 literature (for example, Shen and Wang, 1998;Henke and Voronkova, 2005) explores price limit efficiency using models, which assume a continuous distribution for the residuals (for example, the normal or Student t distributions) and in which the effect of price limits is described by dummy variables. In the presence of price limits, however, the return distributions are doubly truncated.…”

Section: Introductionmentioning

confidence: 99%

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Price discovery and volatility spillover with price limits in Chinese A-shares market: A truncated GARCH approach

Adcock

Yin

et al. 2019

Journal of the Operational Research Society

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The use of price limits by a stock exchange means that the distribution of returns is truncated. By considering a GARCH model in conjunction with a truncated distribution for the residuals, this study investigates whether price limits have an effect on price behaviour and volatility of Chinese A-shares. The analysis has been applied to A-shares traded on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) during the period from 2004 to 2018. The results suggest the Truncated-GARCH model outperforms a conventional model and offers substantially different insights into the effect of price limits. The delayed price discovery hypothesis is not rejected for either exchange after upper price limit hits. Limited evidence supports the volatility spillover hypothesis, as just over 5% of A-shares experience an increase of volatility after upper price limit hits on both exchanges. No evidence of reduction of volatility after price limit hits is shown in the research.

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Price limits on a call auction market: Evidence from the Warsaw Stock Exchange

Cited by 23 publications

References 31 publications

The Effect of Daily Stock Price Limits on the Investment Risk: Evidence from the Egyptian Stock Market

The Effect of Daily Stock Price Limits on the Investment Risk: Evidence from the Egyptian Stock Market

Price limit performance: evidence from transactions data and the limit order book

Price discovery and volatility spillover with price limits in Chinese A-shares market: A truncated GARCH approach

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