Price limits, informed trading, and information consumption

Yan Luo, Haohan Ren and Hao Yang

Research in International Business and Finance, 2024, vol. 71, issue C

Abstract: We use a policy change in the daily price limit rules in the Chinese stock market to examine the impacts of price limits on stock market reactions to corporate earnings announcements. We find that compared with the control stocks’ prices, the prices of stocks that experience a relaxation in price limits become more sensitive to corporate earnings surprises. Further analysis shows that more effective responses are likely associated with the increased trading intensity of nonretail investors and short sellers. Overall, we suggest that the relaxation of the price limit contributes to the incorporation of firm-specific information into stock prices.

Keywords: Price limits; Earnings response coefficients; Informed trading (search for similar items in EconPapers)
JEL-codes: G10 G14 G18 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531924002095
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:71:y:2024:i:c:s0275531924002095

DOI: 10.1016/j.ribaf.2024.102416

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().