The magnet effect of price limits on Taiwan Stock Exchange : evidence from high technology firms

• Main Authors: Yu-Pei Kuo, 郭玉佩
• Other Authors: Wu-Jen Chuang
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/22978989714222657845

碩士 === 淡江大學 === 財務金融學系 === 92 === Many financial markets impose limits on the amount asset prices can change within a trading day to prevent the market from overreacting and, hence, to dampen volatility. We used high-frequency data on Taiwan Stock Exchange (TSE) stocks to conduct an empirical study on the magnet effect of price limits from high technology firms. The magnet effect suggests the asset price accelerates toward the limits as it approaches the limit. We used an AR(3)－GARCH( 2 ,2 ) model for the 5-min returns of each individual stock to analyze the magnet effect. We found that the ceiling magnet is statistically significant but the floor magnet is not. To distinguish the magnet effect from the momentum effect, we included two momentum variables in the regression. After controlling for possible momentum effects, we found that momentum variables dilute the significant of magnet variables. In other words, the magnet effect is purely a manifestation of a momentum effect.