Study On The Intraday Market Effect Of Price Limits In China

Exchange all over the world establish various price stabilization mechanisms with the design of microstructures to ensure the stability of stock markets, among which, the most widely-applied measure is the price limits system. Currently, the price limits for Normal stocks and ST stocks are 10% and 5% respectively in China. Setting price limits could give investors some time to become calm down and to reassess the new information, by which, the prices return to their original movement trends and become closer to their internal values, which is helpful to reduce excess fluctuation of the market and to discover the prices of stocks. Nevertheless, there exist great controversies about the effects of price limits in the academe. The contradictory results of various researches are closely related to the microstructures of the subject markets. Moreover, researches of the price limits system are in the main based on the daily data. It is not sufficient to understand the microstructures of the markets only through examining some low-frequency exchanging data. Recently, with the rapid development of computer technology, more and more researches applying high-frequency data have been carried out.In such circumstances, the present study is undertaken. It firstly dwells on a comparison of the development of the price limits system in and out of China, and then based on the analysis of various of market effects ,it selects the AR-CARCH model, which is suitable for the current study. Thirdly, it introduces the research subjects, constructs the extended model, and explores the market effects of Shanghai Stock Exchange in China empirically. Due to the existence of the Special treatment stocks, the research samples of the study are high-frequency data of common stocks and ST stocks within five minutes. The study mainly focuses on the market effects of the stock markets and compares the differences between stocks with two different price limits systems.The major findings of the present study are briefly summarized as follows: first, compared with the systems of other countries, the price limits in china are found to be relatively strict, but not flexible. Second, the empirical evidence shows that the price limits system has cooling off effect on both the common stocks and the ST stocks, and such effect on the ST stocks is more obvious. Third, the volatility spillover effect of the common stocks is not exist, while the volatility spillover effect of the ST stocks is...