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The Effects of Removing Price Limits: Evidence from Taiwan IPO Stocks

Author

Listed:
  • Mei-Hua Liao
  • Chien-Chih Lin
  • Yinrou Wang

Abstract

There have been few studies of the price limits for initial public offering (IPO) stocks. In 2005, the Taiwanese authorities introduced a trading rule that removed the price limit for IPO stocks during their first five days. In this paper, we investigate the influences of this trading rule on the aftermarket. It is shown that, after implementation of the trading rule, the level of aftermarket returns in the first two weeks became lower, the price was adjusted speedily, and the trading volume was increased.

Suggested Citation

  • Mei-Hua Liao & Chien-Chih Lin & Yinrou Wang, 2011. "The Effects of Removing Price Limits: Evidence from Taiwan IPO Stocks," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 40-52, November.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:0s5:p:40-52
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    Citations

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    Cited by:

    1. Li, Zeguang & Hou, Keqiang & Zhang, Chao, 2021. "The impacts of circuit breakers on China's stock market," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    2. Ruan, Qingsong & Wang, Zilin & Zhou, Yaping & Lv, Dayong, 2020. "A new investor sentiment indicator (ISI) based on artificial intelligence: A powerful return predictor in China," Economic Modelling, Elsevier, vol. 88(C), pages 47-58.
    3. Seza Danışoğlu & Z. Nuray Güner, 2018. "Do price limits help control stock price volatility?," Annals of Operations Research, Springer, vol. 260(1), pages 129-157, January.

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