Empirical Estimates Of Effect Of Price Limit Rule In China's A-stock Market

It is one of important rule of controlling risk, and it is used universly by Stock Exchang all over the world. Although the price limit rule is exerted as a policy by regulaters, there is no unify idea in theory or practice. The supports think that the rule can remain the stability of the market, restrict the over-reaction and not interfere with trading. By contrary, the opponents think that the rule causes to volatility spillover, delayed price discovery and trading interferenceTo evaluate one policy, we should do it from stability,efficiency and mobility. Therefore, this paper do the Empirical Analysis from three aspects, and to attain the effect of the rule.we use event study and group comparison methods to test three hypotheses: delayed price discovery hypothesis, volatility spillover hypothesis and trading interference hypothesis. After that, we analyze the price limits policy in the Chinese stock markets and the effectiveness of this policy from statistical perspectives. We conclude with the pros and cons of applying price limits policy in the Chinese stock market, and propose some useful suggestionsThe study show that the up-price limit causes delayed price discovery hypothesis, volatility spillover hypothesis and trading interference hypothesis. By contrary, there is no three hypotheses in the down-price limit. In summary, the effect of the rule has Asymmetry, so we should state it from different aspect.