Price-limit effectiveness: evidence from the Borsa Istanbul (BIST)
International Journal of Islamic and Middle Eastern Finance and Management
; 15(3):527-568, 2022.
Article
in English
| ProQuest Central | ID: covidwho-1922508
ABSTRACT
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.
Business And Economics--Banking And Finance; Price limits; Magnet effect; Market quality; Price delay; Trading interference; Intraday data; Stock exchanges; Measurement; Behavior; Cooling; Investments; Economic crisis; Hypotheses; Prices; Averages; COVID-19; Authors; Trading; Robustness; Volatility; International finance; Asymmetry
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
Language:
English
Journal:
International Journal of Islamic and Middle Eastern Finance and Management
Year:
2022
Document Type:
Article
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