Price Limit Expansion and Volatility: A Theoretical Perspective
- Title
- Price Limit Expansion and Volatility: A Theoretical Perspective
- Author
- 이정환
- Keywords
- Censored distribution; Investor rationality; Korean stock market; Price limit; Volatility
- Issue Date
- 2021-06
- Publisher
- WILEY
- Citation
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v. 50, NO. 3, Page. 271-287
- Abstract
- We theoretically examine whether and how price limit expansion changes return volatility. This study incorporates competing hypotheses regarding investor reactions to limit-hit events into a model that considers trader irrationality; we then conduct several simulations. We find that, when price limits are widened, stock return volatility tends to increase but may also remain unchanged or decrease. We consider the implications of the study's main findings, which shed light on the mixed empirical results found in the price limit literature so far.
- URI
- https://onlinelibrary.wiley.com/doi/10.1111/ajfs.12328https://repository.hanyang.ac.kr/handle/20.500.11754/176634
- ISSN
- 2041-9945;2041-6156
- DOI
- 10.1111/ajfs.12328
- Appears in Collections:
- COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
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