Are Price Limits Always Bad?

Purnendu Nath
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Purnendu Nath: Purnendu Nath is at the Amplitude Capital LLP, 6–8 Tokenhouse Yard, London EC2R 7AS. E–mail: pnath.phd98@london.edu

Journal of Emerging Market Finance, 2005, vol. 4, issue 3, 281-313

Abstract: This article re–examines the extent, if any, of the negative impacts of price limits. I provide fresh evidence supporting, only partially, the criticisms against the efficacy of such price limits. A negative impact of price limits when valid for one group of stocks or direction of price move, may not hold for another group of stocks or direction of price move. The article also presents a realistic estimate of the potential trading profits that may be made by using price limit hits as a trade signal.

Keywords: Price limits; overreaction hypothesis; price discovery; strategic trading (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:4:y:2005:i:3:p:281-313

DOI: 10.1177/097265270500400304

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