Research On The Influence Of Price Limit Reform On Stock Market Efficiency

On August 24,2020,the price limit of growth Enterprise Board was changed from ±10%to ±20%.This is an important innovation of the basic stock market trading system in China’s stock market,which is of great significance in the development of China’s securities market.The core starting point of this paper is to clarify the market function of the price limit after the reform and its role in improving the efficiency of the stock market.This paper selects the gem and main board market representative listed companies as the research object and downloads data from January 1,2012 to December 31,2021 in the sample period.In order to better demonstrate the efficiency of the stock market,this paper measures asset prices from two perspectives:the response speed of asset prices to information and the transmission quality of asset prices to information.On the basis of reading previous literatures,stock price and price delay are used as proxy variables from two perspectives.Due to the particularity of the samples,this paper selects the dual difference model to construct virtual policy variables to study their impact on stock market efficiency,and then conducts a series of robustness tests such as parallel trend to exclude endogenous effects.After obtaining the core conclusion of this paper,this paper further discusses the intermediary mechanism-the impact of investor sentiment on the two.Through empirical tests,firstly,this paper proves the core conclusion that price limit system on the growth enterprise market liberalisation will effectively promote the market efficiency of the stock market.Specifically,in the market with higher restriction of fluctuation,the synchronicity of stock price and price delay are significantly reduced,proving that the release of price limit significantly improves the efficiency and quality of information transmission.In the further test,it is found that in the process of the decline limit reform,the large-scale companies benefit more from the reform of the rise and fall system,and the response speed of asset prices to information and the transmission quality of asset prices to information become better with the relaxation of the rise and fall.After that,in order to clarify the intermediary mechanism of the impact of trading system reform on stock market efficiency,this paper makes a further study.Finally,it is proved that the lifting of the limit of rise and fall will prevent investors from excessive trading behaviors by affecting investor sentiment and improve the efficiency of the stock market through the universal rational trading of investors in the market.