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Title: Price discovery and volatility spillover with price limits in Chinese A-shares market: A truncated GARCH approach
Authors: Adcock, C
Ye, C
Yin, S
Zhang, D
First Published: 19-Jan-2019
Publisher: Taylor & Francis for OR Society
Citation: Journal of the Operational Research Society, 1476-9360
Abstract: The use of price limits by a stock exchange means that the distribution of returns is truncated. By considering a GARCH model in conjunction with a truncated distribution for the residuals, this study investigates whether price limits have an effect on price behaviour and volatility of Chinese A-shares. The analysis has been applied to A-shares traded on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) during the period from 2004 to 2018. The results suggest the Truncated-GARCH model outperforms a conventional model and offers substantially different insights into the effect of price limits. The delayed price discovery hypothesis is not rejected for either exchange after upper price limit hits. Limited evidence supports the volatility spillover hypothesis, as just over 5% of A-shares experience an increase of volatility after upper price limit hits on both exchanges. No evidence of reduction of volatility after price limit hits is shown in the research.
DOI Link: 10.1080/01605682.2018.1542973
ISSN: 0160-5682
eISSN: 1476-9360
Embargo on file until: 19-Jan-2020
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2019, Operational Research Society. Deposited with reference to the publisher’s open access archiving policy. (
Description: The file associated with this record is under embargo until 12 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, College of Social Science

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