Does Price Limit Affect the Autocorrelation of Stock Return Series? A Monte Carlo Experiment
This paper explores whether the regulation of price limits in financial markets will result in the autocorrelation of stock return series. The results of Monte Carlo Experiment under different error term distribution hypothesis suggest that such price limit mechanism will result in a positive first-order autocorrelation of return series. The results indicates that some statistics in empirical finance literature for testing random walk or market efficiency,for example,the variance ratio of Lo and MacKinlay(1988),may be biased when the stock price is subject to the price limit. This paper also suggests that the further research on the price limit is necessary when more exchanges adopt such regulations in the world.
price limit autocorrelation Monte Carlo stock return
Xicai Guo Zhian Liang Yue Fang
School of Finance,Shanghai University of Finance and Economics,Shanghai,200433,China;Business School Department of Applied Mathematics,Shanghai University of Finance and Economics,Shanghai,200433,China Lundquist College of Business,1208 University of Oregon,Eugene,OR,97403,USA
国际会议
香港
英文
399-402
2010-08-17（万方平台首次上网日期，不代表论文的发表时间）