Would widening price limits improve the efficiency of price discovery?

Jin, Liwei; Yuan, Xianghui; Li, Xiang; Ma, Huanglong; Lian, Feng

doi:10.1016/j.frl.2022.103208

Cited by 4 publications

(2 citation statements)

References 23 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%

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

Bao

2023

PLoS ONE

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“…In contrast, convertible bonds provide investors with the opportunity for “ T + 0” trading, which allows intraday information to be reflected in the price in a timely manner, further facilitating price discovery. In addition, the wider price limits in the convertible bond market also help improve price discovery (L. Jin, Yuan, Li, et al, 2022). These characteristics provide theoretical motivation to explore the price discovery function of convertible bonds.…”

Section: Introductionmentioning

confidence: 99%

Option features and price discovery in convertible bonds

Jin

Yuan

et al. 2022

Journal of Futures Markets

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In this paper, we investigate whether the option features in convertible bonds lead to price discovery. On the basis of minute-level data from January 2019 to December 2021, we find that the convertible bond market contributes to the price discovery of the stock market by using the thermal optimal path method, and that the option features in convertible bonds are an important factor affecting the price discovery ability. Regression analysis shows that the effect of option features remains significant after controlling for a range of variables, such as the size of the convertible bond, the premium rate, information shock, and volatility. In addition, we further explore the impact of the difference in trading regimes between the convertible bond market and the equity market on price discovery.

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