Observed versus theoretical prices under price limit regimes

Levy, Tamir; Yagil, Joseph

doi:10.1016/j.jeconbus.2004.11.003

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Cited by 6 publications

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“…Empirical support for the magnet effect is provided by Cho et al (2002) using intraday data. Additional arguments for observed prices within the price limit zone to be distinct from their fundamental level are given by Kim and Sweeney (2002) and Levy and Yagil (2005).…”

Section: Introductionmentioning

confidence: 93%

A conditional distribution model for limited stock index returns

Friedmann

Sanddorf-Köhle

2007

Journal of Economic Dynamics and Control

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Section: Introductionmentioning

confidence: 93%

A conditional distribution model for limited stock index returns

Friedmann

Sanddorf-Köhle

2007

Journal of Economic Dynamics and Control

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“…Hall and Kofman (2001) find no empirical support for the S‐shape relation between theoretical and actual futures prices in volatile periods. Levy and Yagil (2005) discuss the S‐shape relation between observed and theoretical asset prices in markets governed by a price‐limit mechanism. Finally, Huat et al (2005) examine the impact of a broad price limit range on price discovery processes.…”

Section: Literature Reviewmentioning

confidence: 98%

An Empirical Comparison of Price‐Limit Models^*

Levy

Yagil

2006

Int Rev Finance

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Using futures traded on the Chicago Board of Trade, Chicago Mercantile Exchange and New York Board of Trade, we test six alternative models of the return-generating process (RGP) in futures exchanges that adopt a price-limit regime. We rank the six models according to their return-prediction ability, based on the mean square error criterion, and we find that the near-limit model performed best for both the estimation period and the prediction period. A reliable prediction of the expected return can have important implications for both traders and policy makers, concerning related issues such as the employment of long or short strategy, margin requirements and the effectiveness of the price limit mechanism.

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