The Impact Of Price Limits On China 's Stock Market

As a policy that is used to stabilize securities markets, price limit policy is adopt in our country for a long time. In Dec.16,1996,we formally established a10%price limit range, and continues to today. The price limit policy has made a great contribution to the healthy and stable development, but there is no unify idea in the theory or practice. The supports think that the price limit policy restrict the over-reaction and not interfere with trading, and remain the stability of the market. The opponents think that the price limit policy not only inhibit the excessive volatility of the market, hinder the normal trading market, increase market volatility, therefore should be abolished price limit system. This paper will discuss the above problems, through the empirical analysis of the specific impact of price limit system, and gives the corresponding policy recommendations.This paper use event study and group comparison methods to test the affect of the price limit policy for the2009-2012stock market. The testing methods is Wilcoxon signed ranks test and the parameters of the binomial test. At first, this paper test the volatility spillover effect of price limit, and found the up-price limit has a volatility spillover effect in Shanghai market and Shenzhen market, but the effect of down-price limit is not notable. For the GEM, the up-price limit and down-price limit all has a volatility spillover effect.Then we test the delayed price discovery effect and liquidity disturbing effect, found that both Shanghai market and Shenzhen market, or gem, the price limit policy has the delayed price discovery effect and liquidity disturbing effect, and the effect is more obvious impact on the main board market.Finally, combining with the conclusion, this paper gives some policy Suggestions, namely we can choose to gradually relax until cancel the price limit system, and in this process can take different limits for different market.