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The Magnet Effect Under Relaxed Daily Price Limits: Evidence From Taiwan

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  • Ya-Kai Chang
  • Che-Jui Chang

Abstract

This study investigates the magnet effect after relaxing the daily price limits in the Taiwan Stock Exchange by using a logit model, as proposed by Hsieh, Kim, and Yang (2009). Our empirical results indicate that the magnet effect disappears after the relaxed daily price limits, especially in the down market. That is, the relaxation of the daily price limits lowers market volatility and thus facilitate market stability. Our empirical findings have important policy implications for regulators who are especially concerned about financial market stability and capital market development due to the price limit changes.

Suggested Citation

  • Ya-Kai Chang & Che-Jui Chang, 2021. "The Magnet Effect Under Relaxed Daily Price Limits: Evidence From Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 15(1), pages 33-44.
    • Handle: RePEc:ibf:ijbfre:v:15:y:2021:i:1:p:33-44
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    References listed on IDEAS

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    More about this item

    Keywords

    Price Limits; Magnet Effect; Logit Model;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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