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Price limit bands, risk-return tradeoff and asymmetric volatility: Evidence from Tunisian Stock Exchange sectors

Author

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  • Mnari Othman

    (University of Kairouan Higher Institute of Computer Science and Management of Kairouan, Avenue Khemais El Alouini, 3100 Kairouan, Tunisia and LaREMFIQ, University of Sousse, Route de la ceinture sahloul 3, BP n° 40, 4054 Sousse, Tunisia)

  • Faouel Bassma

    (University of Sousse IHEC Sousse and LaREMFIQ, University of Sousse, Route de la ceinture sahloul 3, BP n° 40, 4054 Sousse, Tunisia)

Abstract

This paper explores the impact of imposing various price limit bands on risk-return trade-off and asymmetric volatility on the Tunisian Stock Exchange (TSE). The study applies the EGARCH-M approach during the period spanning from 2 January 2019 to 31 January 2024, covering the periods before, during, and after the COVID-19 era. During the COVID-19 period, the TSE reduced the per-session price limit to protect investors from severe price fluctuations. Despite this protective measure, the results show that higher volatility is compensated by lower returns on all sectors’ returns. After the crisis, as a first step, the TSE widened the price limits, but subsequently, it narrowed them. The results show that the shift from the wider price limit regime to the narrow price limits regime structurally modifies volatility for small and large cap sectors.

Suggested Citation

  • Mnari Othman & Faouel Bassma, 2024. "Price limit bands, risk-return tradeoff and asymmetric volatility: Evidence from Tunisian Stock Exchange sectors," Economics and Business Review, Sciendo, vol. 10(3), pages 142-162.
    • Handle: RePEc:vrs:ecobur:v:10:y:2024:i:3:p:142-162:n:1008
    DOI: 10.18559/ebr.2024.3.1604
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    References listed on IDEAS

    as
    1. H. R. Seddighi & Il-Hyun Yoon, 2018. "Stock Market Efficiency and Price Limits: Evidence from Korea’s Recent Expansion of Price Limits," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(2), pages 191-200.
    2. Hisham Al Refai & Gazi Mainul Hassan, 2018. "The Impact of Market-wide Volatility on Time-varying Risk: Evidence from Qatar Stock Exchange," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(2_suppl), pages 239-258, August.
    3. H. R. Seddighi & Il-Hyun Yoon, 2018. "Stock Market Efficiency and Price Limits: Evidence from Korea’s Recent Expansion of Price Limits," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 5(2), pages 191-200.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    wider price limits; narrow price limits; risk-return trade-off; asymmetric volatility;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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