Price limits and the value premium in the Taiwan stock market

Chaonan Lin, Kuan-Cheng Ko, Lin Lin and Nien-Tzu Yang

Pacific-Basin Finance Journal, 2017, vol. 41, issue C, 26-45

Abstract: By proposing a measure of limit-hit frequency, this paper provides the first investigation to understand whether and how price limits are related to the cross-section of stock returns. Based on a sample of listed stocks in Taiwan, we show that the value premium is stronger among stocks with lower limit-hit frequency. This evidence is consistent with the prediction of the limited-attention explanation and rejects the limits-to-arbitrage hypothesis for the value premium in Taiwan. Further analyses indicate that the association between limit-hit frequency and the value premium is robust to several alternative explanations.

Keywords: Price limits; Value premium; Investor attention; Limits-to-arbitrage; information uncertainty (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:41:y:2017:i:c:p:26-45

DOI: 10.1016/j.pacfin.2016.12.001

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