Price-limit effectiveness: evidence from the Borsa Istanbul (BIST)

Purpose This paper aims to analyze the impact of price-limit hits by hit type and when such hits start and stop using intraday trades and quotes at a one-second frequency for firms included in the BIST-50 index during the 13-months starting with March 2008. Like the recent COVID-19 period, this period includes the heightened stress in global financial markets in September 2008. Design/methodology/approach Using intra-day trades and quotes at a one-second frequency, the authors examine the market effects of price limits for firms included in the BIST-50 index during the global financial crisis. The authors compare the values of various metrics for 60 min centered on price-limit hit periods. The authors conduct robustness tests using auto regressive integrated moving average (ARIMA) models with trade-by-trade and with 3-min returns. Findings The findings are supportive of the following hypotheses: magnet price effects, greater informational asymmetric effects of market quality and each version of price discovery. Results are robust using samples differentiated by cross-listed status, same-day quotes instead of transaction prices and equidistant and trade-by-trade returns. Originality/value The authors use intraday data to reduce measurement error that is particularly pronounced when daily data are used to assess price limits that start and/or stop during a trading session. The authors contribute to the micro-structure literature by using ARIMA models with trade-by-trade and 3-min returns to alleviate some bias due to the autocorrelations in returns around price-limit hits in the presence of a magnet effect. The authors include some recent regulation changes in various countries to illustrate the importance of circuit breakers using price limits during COVID-19.

An empirical behavioral order-driven model with price limit rules

We propose an empirical behavioral order-driven (EBOD) model with price limit rules, which consists of an order placement process and an order cancellation process. All the ingredients of the model are determined based on the empirical microscopic regularities in the order flows of stocks traded on the Shenzhen Stock Exchange. The model can reproduce the main stylized facts in real markets. Computational experiments unveil that asymmetric setting of price limits will cause the stock price to diverge exponentially when the up price limit is higher than the down price limit and to vanish vice versa. We also find that asymmetric price limits have little influence on the correlation structure of the return series and the volatility series, but cause remarkable changes in the average returns and the tail exponents of returns. Our EBOD model provides a suitable computational experiment platform for academics, market participants, and policy makers.

IPO underpricing and long-term performance in China: the perspective of price limit policy

PurposeThe purpose of this paper is to explore how the price limit policy implemented in 2014 affects initial public offering (IPO) underpricing and long-term performance in China.Design/methodology/approachThe data are the IPOs from Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) between 2004 and 2018. The data are firstly divided into the IPOs before the price limit policy and the IPOs after the price limit policy according to the time of issuance. Then the two groups are divided into 4 subsamples according to the market blocks and the P/E ratio. The authors use multiple regression models to explore the effect of price limit policy in each subsample.FindingsThe first-day price limit system for IPOs is similar to the upward fuse mechanism, the purpose of which is to suppress IPO underpricing. However, this study finds that the policy does not suppress IPO underpricing, but increases the underpricing rate in all subsamples. Besides, the long-term performance in each subsample is different from each other. Main Board stocks’ long-term performance is worse after the policy. The policy makes Small and Medium Enterprise Board (SME Board) and Growth Enterprise Market Board (GEM Board) stocks with high P/E ratios perform better in the long term. For SME Board and GEM Board stocks with low P/E ratios, the policy makes no significant effect.Practical implicationsGood policy intentions may sometimes lead to counterproductive effects. However, since the long-term performance of each subsample is different, it is difficult to judge whether the policy should continue to be implemented or cancelled. Implementing different policies for different subsamples may be a better way to solve this problem.Originality/valueThis paper contributes to the study of IPO underpricing and long-term performance from the perspective of price limit policy.

Reconstruction Parate Execution of Liability Rights and Roles the Parties in the Determination of Auction Price Limit Value Justice Based Warranty

Determining the Price Limit Value at the Parate Auction for Execution of Collateral Goods Bound to Mortgage, departs from the issues discussed, namely how the parate reconstruction of mortgage execution and the role of the parties in determining the limit value of the auction price of goods justice based guarantees? The purpose of this research is to analyze and find the reconstruction of the execution parate of mortgage rights and the role of the parties in determining the limit value of the auction price of collateral based on justice. The research method uses normative legal research, with a statutory approach (statute approach) and a case approach (case approach). Sources of legal materials used consist of primary, secondary and tertiary legal materials, while the analysis of legal materials is carried out in a descriptive qualitative manner. Based on the results of the research, it can be concluded that the parate reconstruction of mortgage execution must be based on justice, meaning that execution through parate execution based on the provisions of Article 6 of the Mortgage Rights Law, must also be balanced with other prerequisites that must be passed in order to minimize the arising of arbitrariness. The role of the parties in determining the limit value of the collateral auction price will be well realized if in determining the limit value determined based on the results of the appraiser's assessment, where the auction limit value must be as low as the liquidation value so that the auction office has the authority to reject the auction request. submitted by the seller, if it does not comply with the standards specified in the Minister of Finance Regulation No.27 / PMK.06 / 2016.

Effectiveness of Price Limit on Stock Market Network: A Time-Migrated DCCA Approach

In this paper, we investigated the effectiveness of price limit on stock market with the correlation study and complex network technology. We proposed a time-migrated DCCA cross-correlation coefficient which is beneficial to detect the asynchronous correlations of nonstationary time series. The stock market network is constructed with the threshold method based on time-migrated DCCA. The effectiveness of the price limit during the stock market crash period is studied based on the time-migrated DCCA stock market network. The results indicate that the time-migrated DCCA ensures more relevant results than the equal-time DCCA method. An interesting finding is that the price limit has different effects on the stock market network at different stages of dynamic evolution. Market stabilization will be lowered and the systemic risk will be increased if the price limit is enhanced. Such studies are relevant for a better understanding of the stock market and have a significant contribution to the stock market in reality.