Price limit change and magnet effect: The role of investor attention

Zhang, Xiaotao; Li, Xinxian; Hao, Jing; Li, Peigong

doi:10.1016/j.frl.2022.103577

Cited by 6 publications

(1 citation statement)

References 31 publications

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“…Secondly, the research results have certain policy implications. In contrast to existing literature on this reform [14][15][16][17], we take a unique approach by comparing pre-reform price limit events with post-reform events that, although not reaching the actual price limit, met the pre-reform criteria based on price fluctuations. This comparative study enables us to analyze the effects of this reform from a micro-level mechanism perspective.…”

Section: Introductionmentioning

confidence: 99%

Effectiveness of price limits: Evidence from China’s ChiNext market

Bao

2023

PLoS ONE

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Starting from August 24, 2020, the daily stock price limits in China’s ChiNext market have been adjusted from 10% to 20%. We use this reform to study the effectiveness of price limits in China’s stock market. We test four hypotheses about price limits: delayed price discovery, volatility spillover, trading interference, and magnet effect. Using the event study method, we examine the differences in the behavior of stock price, trading volume, and volatility before and after the reform. We confirm the delayed price discovery, volatility spillover and trading interference hypothesis of price limits, and find that these negative effects of price limits are more serious when lower limits are hit. In addition, we examine the distribution of large price movements before and after the reform and find no evidence of the magnet effect of price limits. The present research has important implications for policymakers and investors in China’s stock market.

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Section: Introductionmentioning

confidence: 99%