Empirical Research On The Effects Of Price Limits

In order to find out the effects on stock prices of price limits in China, this paper puts the research into two parts on the base of event study. In the first part, this paper analyzes the data of Shanghai A Share Stock Exchange by using ARCH models and many kinds of statistical testing methods. Having estimated the long-term fluctuation with the GARCH model, discovered the dependency among stock prices with autocorrelation function and compared lots of the liquidity scale, this paper makes the conclusion that the price limit does not delay the stock`s return to the equilibrium price and can reduce the market fluctuation, but that it may make the market liquidity a little worse. In the second part, this paper makes regression analysis between frequency of hitting price limit and influence factors of stock prices by using the general method of moment, so do the change rate of all variables, and finds out whether there is character of stock related to hitting price limit obviously, this paper proves that corporate scale and p/e ratio is significantly positively correlated to hitting price limit, and that system risk is significantly negatively correlated to hitting price limit, and that the change ratio of trading frequency is significantly positively correlated to that of hitting price limit.