Price limit changes, order decisions, and stock price movements: an empirical analysis of the Taiwan Stock Exchange

Donald Lien (), Pi-Hsia Hung () and Chiu-Ting Pan
Additional contact information
Donald Lien: University of Texas at San Antonio
Pi-Hsia Hung: National Chi Nan University
Chiu-Ting Pan: National Chi Nan University

Review of Quantitative Finance and Accounting, 2020, vol. 55, issue 1, No 8, 239-268

Abstract: Abstract This study examines the relationships among price limit changes, order submission decisions, and stock returns in the Taiwan Stock Exchange. Specifically, we first investigate whether price limit changes affect overall investors’ order aggressiveness and trade size. We then analyze the relationships across trader types. Finally, we analyze the effects on future stock returns. Our analysis yields the following findings. (1) Stock traders’ order submission decisions are quite different in the post- versus pre-event periods, as they place orders at more aggressive prices but with smaller sizes after the price limit changes. (2) Buy and sell orders demonstrate asymmetric effects with sell orders responding to a policy change in a more diversified way than do buy orders. (3) The sensitivities of order submission decisions to a policy change are significantly different across trader classes. Foreign investors are conservative while investment trusts drastically change their post-event order submission behaviors. (4) Professional institutions’ trade size is a better predictor of future stock returns than order aggressiveness.

Keywords: Market microstructure; Order aggressiveness; Trade size; Price variation; Trading strategy (search for similar items in EconPapers)
JEL-codes: D03 D82 G14 G23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11156-019-00842-3 Abstract (text/html)
Access to full text is restricted to subscribers.

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:rqfnac:v:55:y:2020:i:1:d:10.1007_s11156-019-00842-3

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

DOI: 10.1007/s11156-019-00842-3

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().