Would widening price limits improve the efficiency of price discovery?

Liwei Jin, Xianghui Yuan, Xiang Li, Huanglong Ma and Feng Lian

Finance Research Letters, 2022, vol. 50, issue C

Abstract: Based on a quasi-natural experiment of widening price limits on GEM (Growth Enterprise Market) stocks of China, we examine how to price limit affects price discovery using data on GEM and Main Board stocks. Price discovery efficiency is measured in terms of both speed and accuracy. We find that widening the price limit enhances price discovery efficiency significantly, and the results are robust, using the DID (Differences-in-Differences) model.

Keywords: Variance ratio; Price discovery; WPC method; GEM (search for similar items in EconPapers)
JEL-codes: C10 G10 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004135

DOI: 10.1016/j.frl.2022.103208

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