Are price limits really bad for equity markets?

Deb, S, Kalev, P and Marisetty, V 2010, 'Are price limits really bad for equity markets?', Journal of Banking and Finance, vol. 34, no. 10, pp. 2462-2471.

Document type: Journal Article
Collection: Journal Articles

Title Are price limits really bad for equity markets?
Author(s) Deb, S
Kalev, P
Marisetty, V
Year 2010
Journal name Journal of Banking and Finance
Volume number 34
Issue number 10
Start page 2462
End page 2471
Total pages 10
Publisher Elsevier
Abstract Despite widely documented criticisms, price-limit rules are present in many equity markets around the world. Using a game-theoretic model, we argue that, if the cost of monitoring a market is high, price-limit rules are beneficial. Empirical tests based on a cross section of 43 equity markets across five continents support our theoretical prediction. We find that the probability of the existence of price-limit rules is greater in markets that incur higher monitoring costs due to poorer business disclosure, more corruption and less efficiency in legal, regulatory and technological environments.
Subject Banking, Finance and Investment not elsewhere classified
Keyword(s) Market manipulation
Market monitoring costs
Price limit
DOI - identifier 10.1016/j.jbankfin.2010.04.001
Copyright notice © 2010 Published by Elsevier B.V.
ISSN 0378-4266
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Citation counts: TR Web of Science Citation Count  Cited 12 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 12 times in Scopus Article | Citations
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