Abstract
We use account-level data from the Shenzhen Stock Exchange to show that daily price limits, a widely adopted market stabilization mechanism, may lead to unintended, destructive market behavior: large investors tend to buy on the day when a stock hits the 10% upper price limit and then sell on the next day; and their net buying on the limit-hitting day predicts stronger long-run price reversal. We also analyze a sample of special treatment (ST) stocks, which face tighter 5% daily price limits, and provide a causal validation from comparing market dynamics before and after they are assigned the ST status.
| Original language | English |
|---|---|
| Pages (from-to) | 249-264 |
| Number of pages | 16 |
| Journal | Journal of Econometrics |
| Volume | 208 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Jan 2019 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 10 Reduced Inequalities
User-Defined Keywords
- Financial regulation
- Investor behavior
- Price limit rule
- Speculation
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