Study On The Effect Of Daily Limit Of Listed Companies And Its Amplitude

The original intention of the Price Limits Policies is to limit price volatility, but people holding different views of the impact of it. Supporters argue that the Price Limits Policies help to prevent the panic of investors that may arise, help to reduce price volatility, help to control market risks too; Opponents believe that the Price Limits Policies instead of reducing the price volatility, but increasing the market volatility of the subsequent trading days, hindering the formation of the equilibrium price, and impacting the play of the market mechanism.In order to study the effect of price limits on China’s Growth Enterprise Market, this paper uses the daily data of GEM, uses the 11 day trading chain data, and uses the "event study" and "grouping comparison method" to test volatility spillover hypothesis, delayed price discovery hypothesis and hinder trade hypothesis. The results are: Firstly, when the sharp rise in the share price occurred, the Price Limits Policies leads to the volatility spillover into the back of the first trading day, so the stock price limits caused the sharp rise in volatility spillovers; When the stock price fell sharply, stock price limits does not cause the volatility spillover to the back of the trading days, but only caused the volatility greatly increases in the trading day before, so when shares fell, price limits without causing volatility spillover effect. Secondly, the sharp rise in the share price and the sharp decline occurred in both cases, the Price Limits Policies makes the transaction stoped, so that the price reactions to new information has been delayed, and the stock can not meet the new equilibrium in short time, which verifies the price limit system delayed the price discovery of GEM listing corporation. Thirdly, when the stock price moves upward, the adjusting of the limit stock holdings will continue to the next trading day after the daily limit, which verifies the price limit system hindered the trade of GEM; The downward movement in the stock price, the adjusting of the limit stock holdings can be completed on the same day. So there is no hinder the trading effect.The empirical results show that the price limit, to some extent, distorted the price behavior of the GEM market, therefore, in order to find a more reasonable price ups and downs, This paper attempts to construct an artificial stock market model based on order-driven, and portrayes the investment behavior of bidding transaction of investors. By setting the stock price in the simulation experiments of different price limit range, the analysis results show that the appropriate expansion of price limits will not increase the volatility of stock returns, but fluctuations in earnings would have decreased.