IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v52y2020i13p1476-1486.html
   My bibliography  Save this article

Widening price limit effects: evidence from an emerging stock market

Author

Listed:
  • Chiou-Fa Lin
  • Cheng-Huei Chiao

Abstract

This study investigates the impact of the widening of price limits on the Taiwan Stock Exchange, from 7% to 10%, by comparing the differences in performance with the different price limit levels. The empirical results show that after the event: (1) the quoted and effective spreads increased, including the components of realized spread and information asymmetry; (2) the trade-related and quote-related standard deviations and the price discovery became larger. Our outcomes indicate that the widening of price limits was disadvantageous to liquidity, but helpful for price discovery. These results imply that wider price limits are not necessarily always better than narrow price limits in every respect, but that the optimal level of price limits should be based upon the regulators’ intended goals.

Suggested Citation

  • Chiou-Fa Lin & Cheng-Huei Chiao, 2020. "Widening price limit effects: evidence from an emerging stock market," Applied Economics, Taylor & Francis Journals, vol. 52(13), pages 1476-1486, March.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:13:p:1476-1486
    DOI: 10.1080/00036846.2019.1676388
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2019.1676388
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2019.1676388?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jin, Liwei & Yuan, Xianghui & Li, Xiang & Ma, Huanglong & Lian, Feng, 2022. "Would widening price limits improve the efficiency of price discovery?," Finance Research Letters, Elsevier, vol. 50(C).
    2. Liwei Jin & Xianghui Yuan & Li Peiran & Hailun Xu & Feng Lian, 2023. "Option features and price discovery in convertible bonds," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(3), pages 384-403, March.
    3. Zhang, Xiaotao & Wang, Ziqiao & Hao, Jing & He, Feng, 2022. "Price limit and stock market quality: Evidence from a quasi-natural experiment in the Chinese stock market," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:52:y:2020:i:13:p:1476-1486. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.