1. Flexible price limits: the case of Tokyo Stock Exchange
- Author
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Vijaya B. Marisetty, Petko S. Kalev, Saikat Deb, Deb, Saikat Sovan, Kalev, Petko S, and Marisetty, Vijaya B
- Subjects
Wholesale price index ,Economics and Econometrics ,Cost price ,Financial economics ,volatility spill-over ,Mid price ,daily price limits ,TheoryofComputation_GENERAL ,consecutive price limit hit ,Law of one price ,Econometrics ,Economics ,Forward price ,Price level ,Bid price ,Finance ,Limit price - Abstract
Daily price limits are criticized for their role in disrupting price adjustment process. We propose a flexible price limits mechanism as an alternative to daily price limit rules. First, we identify volatility spill-over and consecutive price limit hits as the source for disrupting informed trading. Later, we propose flexible price limits that can be implemented by using predicted probability of volatility spill-over and consecutive price limit hits. We provide empirical evidence in support of flexible price limits’ efficiency by using 5 years intra-day data of stocks listed on the Tokyo Stock Exchange. Refereed/Peer-reviewed
- Published
- 2013