The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)

Financial market crashes in recent decades have given rise to discussions about excessive volatility in these markets. Some authorities recommend price limits as a device to control excessive price swings, arguing that price limits can provide a cooling-off period that allows investors to re-evaluat...

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Autores principales:	Ahmad Badri, Maryam Ramezanian
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2010
Materias:	price limit volatility volume size tehran stock exchange Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/53b6747f91bb46109ae926881b265fb6
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spelling	oai:doaj.org-article:53b6747f91bb46109ae926881b265fb62021-11-04T19:40:23ZThe Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)2008-89142476-292X10.22103/jak.2010.39https://doaj.org/article/53b6747f91bb46109ae926881b265fb62010-11-01T00:00:00Zhttps://jak.uk.ac.ir/article_39_fcd8bc17c7ac5895c26a3825b1f98f61.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XFinancial market crashes in recent decades have given rise to discussions about excessive volatility in these markets. Some authorities recommend price limits as a device to control excessive price swings, arguing that price limits can provide a cooling-off period that allows investors to re-evaluate market information and make more rational decisions during the period of extreme price changes. On the other side, opponents claim that price limits cause volatility to spread out over a longer period of time, harming the price discovery process and liquidity of the market. These different opinions illustrate the lack of consensus on the effectiveness of price limits. This study empirically investigates the effectiveness of price limits by examining stock market characteristics (such as volatility and volume) around the revision of price limit (from 5% to 2% in 1384 and from 2% to 3% in 1387) on the Tehran Stock Exchange (TSE). The main finding of this study is that for the cross-section of stocks, the change in price limits is negatively related to the change in (weekly) volatility and trading volume. That is, price limit mechanism could not effectively reduce volatility in TSE. The second finding of this study is that the effects of the revision in price limit have no relation with size.Ahmad BadriMaryam RamezanianShahid Bahonar University of Kermanarticleprice limitvolatilityvolumesizetehran stock exchangeAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 1, Iss 3, Pp 31-58 (2010)
institution	DOAJ
collection	DOAJ
language	FA
topic	price limit volatility volume size tehran stock exchange Accounting. Bookkeeping HF5601-5689
spellingShingle	price limit volatility volume size tehran stock exchange Accounting. Bookkeeping HF5601-5689 Ahmad Badri Maryam Ramezanian The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
description	Financial market crashes in recent decades have given rise to discussions about excessive volatility in these markets. Some authorities recommend price limits as a device to control excessive price swings, arguing that price limits can provide a cooling-off period that allows investors to re-evaluate market information and make more rational decisions during the period of extreme price changes. On the other side, opponents claim that price limits cause volatility to spread out over a longer period of time, harming the price discovery process and liquidity of the market. These different opinions illustrate the lack of consensus on the effectiveness of price limits. This study empirically investigates the effectiveness of price limits by examining stock market characteristics (such as volatility and volume) around the revision of price limit (from 5% to 2% in 1384 and from 2% to 3% in 1387) on the Tehran Stock Exchange (TSE). The main finding of this study is that for the cross-section of stocks, the change in price limits is negatively related to the change in (weekly) volatility and trading volume. That is, price limit mechanism could not effectively reduce volatility in TSE. The second finding of this study is that the effects of the revision in price limit have no relation with size.
format	article
author	Ahmad Badri Maryam Ramezanian
author_facet	Ahmad Badri Maryam Ramezanian
author_sort	Ahmad Badri
title	The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
title_short	The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
title_full	The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
title_fullStr	The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
title_full_unstemmed	The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)
title_sort	effect of change in price limit on stock market volatility and trading volume -evidence from tehran stock exchange (tse)
publisher	Shahid Bahonar University of Kerman
publishDate	2010
url	https://doaj.org/article/53b6747f91bb46109ae926881b265fb6
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The Effect of Change in Price Limit on Stock Market Volatility and Trading Volume -Evidence from Tehran Stock Exchange (TSE)

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