Could increasing price limits reduce up limit herding? Evidence from China's capital market reform

Yu Ma, Wenyu Qian and Zhiqian Luan

Finance Research Letters, 2021, vol. 42, issue C

Abstract: On August 24, 2020, trading rules of Shenzhen Stock Exchange's ChiNext board in China were amended to set ±20% price limits. We conducted an event study to reveal whether and how investors’ behavior should change after the increased price limits’ implementation. The results show that after the implementation of the new trading rules, investors flocked to the ChiNext board, resulting in a surge in turnover in this board. ChiNext leading stocks demonstrated significant cumulative abnormal returns (CAR) versus both STAR board and main board. In general, the new trading rules has produced a stronger up limit herding effect in ChiNext board.

Keywords: price limits; herding effect; trading rules; ChiNext board (search for similar items in EconPapers)
JEL-codes: G14 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612320317232

DOI: 10.1016/j.frl.2020.101909

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