Price Gap Anomaly: Empirical Study of Opening Price Gaps and Price Disparities in Chinese Stock Indices

Yuancheng Si () and Saralees Nadarajah ()
Additional contact information
Yuancheng Si: Fudan University
Saralees Nadarajah: University of Manchester

Asia-Pacific Financial Markets, 2025, vol. 32, issue 2, No 7, 525-561

Abstract: Abstract In this study, we employ statistical analysis, hypothesis testing, and regression models to investigate the characteristics of opening price gap rates and price gaps in the stock market indices of Mainland China, utilizing historical data. To clarify, while both ’opening price gap rate’ and ’price gaps’ are central to our analysis, they represent distinct concepts. The opening price gap rate refers to the rate at which a stock’s opening price differs from its previous closing price, indicating initial market sentiment and potential momentum for the trading day. In contrast, price gaps, as defined in technical analysis, are specific chart patterns formed by two adjacent candlesticks on consecutive trading days. These patterns are characterized either by one candlestick’s low being higher than the following day’s high, or one candlestick’s high being lower than the following day’s low, creating a "blank" area on the price chart. This signifies a price range with no trading activity and is a crucial indicator of market sentiment and potential directional moves. Our study tested and validated thirteen related hypotheses. The findings reveal a significant correlation between the directionality of price gaps and the fluctuations in opening price gap rates, highlighting key characteristics of the market. Notably, price gaps significantly impact daily changes in trading volume and turnover. Furthermore, we validated the efficacy of the opening price gap rate as a stock-picking factor through back-testing. This research offers a new perspective for understanding stock market behaviors and has considerable implications for investment decisions and market analysis.

Keywords: Opening price gaps; Price disparities; Chinese stock indices; Stock selection strategies (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10690-024-09461-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:kap:apfinm:v:32:y:2025:i:2:d:10.1007_s10690-024-09461-y

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/10690/PS2

DOI: 10.1007/s10690-024-09461-y

Access Statistics for this article

Asia-Pacific Financial Markets is currently edited by Jiro Akahori

More articles in Asia-Pacific Financial Markets from Springer, Japanese Association of Financial Economics and Engineering
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().