Flexible price limits: The case of Tokyo Stock Exchange

Saikat Sovan Deb, Petko S. Kalev and Vijaya B. Marisetty

Journal of International Financial Markets, Institutions and Money, 2013, vol. 24, issue C, 66-84

Abstract: Daily price limits are criticized for their role in disrupting price adjustment process. We propose a flexible price limits mechanism as an alternative to daily price limit rules. First, we identify volatility spill-over and consecutive price limit hits as the source for disrupting informed trading. Later, we propose flexible price limits that can be implemented by using predicted probability of volatility spill-over and consecutive price limit hits. We provide empirical evidence in support of flexible price limits’ efficiency by using 5 years intra-day data of stocks listed on the Tokyo Stock Exchange.

Keywords: Daily price limits; Volatility spill-over; Consecutive price limit hit (search for similar items in EconPapers)
JEL-codes: G10 G18 G19 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:24:y:2013:i:c:p:66-84

DOI: 10.1016/j.intfin.2012.11.002

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