Does price limit reduce stock price volatility on the limit up and down day?

Shaorong Jin, Chaobo Zhou and Huan Peng

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: It is difficult for the current researches to effectively describe the real influence of price limit on stock price on the limit up and down day. This study embeds the working principle of band-pass filter in the relationship between price limit and stock price volatility, and constructs GARCH (1, 1) model by using the high-frequency transaction data in Chinese stock market to re-examine the influence of price limit on stock price volatility on the limit up and down day. The results show that price limit doesn't play a role in reducing the stock price volatility but contributes to the volatility.

Keywords: Price limit; Band-pass filter; Stock price volatility (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006748

DOI: 10.1016/j.frl.2023.104302

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