Chapter 11 Price limits in Asia-Pacific financial markets: The case of the Shanghai stock exchange

Abstract

Several Asia-Pacific financial markets impose price limits to reduce excessive fluctuations. We examine stock price behavior following daily limit moves on the Shanghai Stock Exchange for 200 firms in the period 1997–2004. We find weak evidence for the occurrence of overreaction on the Shanghai stock market on the basis of price limits. We conclude that investors do not exhibit overreaction to the event of limit activation except in the case of 1-day up limit moves. We also conclude that the Shanghai Stock Exchange can be regarded as a (semistrong) efficient market.

Citation

Scholtens, B. and Yao, L. (2007), "Chapter 11 Price limits in Asia-Pacific financial markets: The case of the Shanghai stock exchange", Kim, S.-J. and Mckenzie, M.D. (Ed.) Asia-Pacific Financial Markets: Integration, Innovation and Challenges (International Finance Review, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 229-244. https://doi.org/10.1016/S1569-3767(07)00011-8