NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ting Chen

Princeton University and
The Hong Kong University of Science
and Technology

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Princeton University and The Chinese University of Hong Kong (Shenzhen

NBER Working Papers and Publications

November 2017Daily Price Limits and Destructive Market Behavior
with Zhenyu Gao, Jibao He, Wenxi Jiang, Wei Xiong: w24014
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.

Published: Ting Chen & Zhenyu Gao & Jibao He & Wenxi Jiang & Wei Xiong, 2018. "Daily price limits and destructive market behavior," Journal of Econometrics, .

 
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