Price limit bands, risk-return tradeoff and asymmetric volatility: Evidence from Tunisian Stock Exchange sectors

Mnari Othman () and Faouel Bassma ()
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Mnari Othman: University of Kairouan Higher Institute of Computer Science and Management of Kairouan, Avenue Khemais El Alouini, 3100 Kairouan, Tunisia and LaREMFIQ, University of Sousse, Route de la ceinture sahloul 3, BP n° 40, 4054 Sousse, Tunisia
Faouel Bassma: University of Sousse IHEC Sousse and LaREMFIQ, University of Sousse, Route de la ceinture sahloul 3, BP n° 40, 4054 Sousse, Tunisia

Economics and Business Review, 2024, vol. 10, issue 3, 142-162

Abstract: This paper explores the impact of imposing various price limit bands on risk-return trade-off and asymmetric volatility on the Tunisian Stock Exchange (TSE). The study applies the EGARCH-M approach during the period spanning from 2 January 2019 to 31 January 2024, covering the periods before, during, and after the COVID-19 era. During the COVID-19 period, the TSE reduced the per-session price limit to protect investors from severe price fluctuations. Despite this protective measure, the results show that higher volatility is compensated by lower returns on all sectors’ returns. After the crisis, as a first step, the TSE widened the price limits, but subsequently, it narrowed them. The results show that the shift from the wider price limit regime to the narrow price limits regime structurally modifies volatility for small and large cap sectors.

Keywords: wider price limits; narrow price limits; risk-return trade-off; asymmetric volatility (search for similar items in EconPapers)
JEL-codes: G10 G18 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:10:y:2024:i:3:p:142-162:n:1008

DOI: 10.18559/ebr.2024.3.1604

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