THE MAGNET EFFECT UNDER RELAXED DAILY PRICE LIMITS: EVIDENCE FROM TAIWAN

Ya-Kai Chang and Che-Jui Chang

The International Journal of Business and Finance Research, 2021, vol. 15, issue 1, 33-44

Abstract: This study investigates the magnet effect after relaxing the daily price limits in the Taiwan Stock Exchange by using a logit model, as proposed by Hsieh, Kim, and Yang (2009). Our empirical results indicate that the magnet effect disappears after the relaxed daily price limits, especially in the down market. That is, the relaxation of the daily price limits lowers market volatility and thus facilitate market stability. Our empirical findings have important policy implications for regulators who are especially concerned about financial market stability and capital market development due to the price limit changes.

Keywords: Price Limits; Magnet Effect; Logit Model (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:15:y:2021:i:1:p:33-44

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