THE EFFECTIVENESS OF PRICE LIMITS ON THE VOLATILITY OF STOCK RETURNS IN TEHRAN'S STOCK EXCHANGE

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GHALIBAF ASL HASSAN; RASEKH SOMAYEH

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Journal: Management Research in Iran Year:2013 | Volume:17 | Issue:3 Page(s): 191-210

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Title

THE EFFECTIVENESS OF PRICE LIMITS ON THE VOLATILITY OF STOCK RETURNS IN TEHRAN'S STOCK EXCHANGE

Author(s)

GHALIBAF ASL HASSAN | RASEKH SOMAYEH | Issue Writer Certificate

Keywords

STOCK EXCHANGEQ2

PRICE LIMITQ2

VOLATILITY EXTENSIONSQ2

DELAY IN REACHING THE REAL PRICESQ2

INTERVENTION IN TRANSACTIONSQ2

Abstract

Illogical limits of the stock prices have led to ambiguities in optimal resource allocations. PRICE LIMIT prevents increase or decrease in the stock prices with respect to the predetermined prices. There are different viewpoints on the implementation of stock PRICE LIMITs. The negative or positive effects of implementing stock PRICE LIMITs have not yet been demonstrated. Those who advocate implementation of PRICE LIMITs claim that these measurements can reduce price volatility while not intervening in the transactions. On the contrary, the critics argue that PRICE LIMITs will make more volatility (hypothesis of volatility extension), prevent stock price to reach the balance level (hypothesis for delay in reaching real price), and also intervene in transactions through limiting the stock prices (hypothesis of INTERVENTION IN TRANSACTIONS). Different models and methods have so far been provided for measuring the effectiveness of PRICE LIMITs in different global STOCK EXCHANGEs; each of which is appropriate for certain conditions. To study the delay in reaching the real price, Z binomial test was used and Wilcoxon test was applied for studying the INTERVENTION IN TRANSACTIONS. For this purpose, 32 companies were reviewed through the current research since 2000 to 2009. The results indicated that PRICE LIMIT can extend volatility and make delays in reaching the real prices. However, it does not influence on intervening the transactions.

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APA: Copy

GHALIBAF ASL, HASSAN, & RASEKH, SOMAYEH. (2013). THE EFFECTIVENESS OF PRICE LIMITS ON THE VOLATILITY OF STOCK RETURNS IN TEHRAN'S STOCK EXCHANGE. MANAGEMENT RESEARCH IN IRAN (MODARES HUMAN SCIENCES), 17(3), 191-210. SID. https://sid.ir/paper/391247/en

Vancouver: Copy

GHALIBAF ASL HASSAN, RASEKH SOMAYEH. THE EFFECTIVENESS OF PRICE LIMITS ON THE VOLATILITY OF STOCK RETURNS IN TEHRAN'S STOCK EXCHANGE. MANAGEMENT RESEARCH IN IRAN (MODARES HUMAN SCIENCES)[Internet]. 2013;17(3):191-210. Available from: https://sid.ir/paper/391247/en

IEEE: Copy

HASSAN GHALIBAF ASL, and SOMAYEH RASEKH, “THE EFFECTIVENESS OF PRICE LIMITS ON THE VOLATILITY OF STOCK RETURNS IN TEHRAN'S STOCK EXCHANGE,” MANAGEMENT RESEARCH IN IRAN (MODARES HUMAN SCIENCES), vol. 17, no. 3, pp. 191–210, 2013, [Online]. Available: https://sid.ir/paper/391247/en

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