title: Statistical properties and pre-hit dynamics of price limit hits in the Chinese stock markets.
abstract: Price limit trading rules are adopted in some stock markets (especially emerging markets) trying to cool off traders' short-term trading mania on individual stocks and increase market efficiency. Under such a microstructure, stocks may hit their up-limits and down-limits from time to time. However, the behaviors of price limit hits are not well studied partially due to the fact that main stock markets such as the US markets and most European markets do not set price limits. Here, we perform detailed analyses of the high-frequency data of all A-share common stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange from 2000 to 2011 to investigate the statistical properties of price limit hits and the dynamical evolution of several important financial variables before stock price hits its limits. We compare the properties of up-limit hits and down-limit hits. We also divide the whole period into three bullish periods and three bearish periods to unveil possible differences during bullish and bearish market states. To uncover the impacts of stock capitalization on price limit hits, we partition all stocks into six portfolios according to their capitalizations on different trading days. We find that the price limit trading rule has a cooling-off effect (object to the magnet effect), indicating that the rule takes effect in the Chinese stock markets. We find that price continuation is much more likely to occur than price reversal on the next trading day after a limit-hitting day, especially for down-limit hits, which has potential practical values for market practitioners.
authors: Department of Mathematics, School of Science, East China University of Science and Technology, Shanghai 200237, China; Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China.
authors: Yu-Lei
authors: YL
authors: Wan
authors: Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China; Department of Finance, School of Business, East China University of Science and Technology, Shanghai 200237, China; Postdoctoral Research Station, School of Social and Public Administration, East China University of Science and Technology, Shanghai 200237, China.
authors: Wen-Jie
authors: WJ
authors: Xie
authors: Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China; Department of Finance, School of Business, East China University of Science and Technology, Shanghai 200237, China.
authors: Gao-Feng
authors: GF
authors: Gu
authors: Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China; Department of Finance, School of Business, East China University of Science and Technology, Shanghai 200237, China.
authors: Zhi-Qiang
authors: ZQ
authors: Jiang
authors: Shenzhen Stock Exchange, Shenzhen 518010, China.
authors: Wei
authors: W
authors: Chen
authors: College of Management and Economics, Tianjin University, Tianjin 300072, China; China Center for Social Computing and Analytics, Tianjin University, Tianjin 300072, China.
authors: Xiong
authors: X
authors: Xiong
authors: College of Management and Economics, Tianjin University, Tianjin 300072, China; China Center for Social Computing and Analytics, Tianjin University, Tianjin 300072, China.
authors: Wei
authors: W
authors: Zhang
authors: Department of Mathematics, School of Science, East China University of Science and Technology, Shanghai 200237, China; Research Center for Econophysics, East China University of Science and Technology, Shanghai 200237, China; Department of Finance, School of Business, East China University of Science and Technology, Shanghai 200237, China.
authors: Wei-Xing
authors: WX
authors: Zhou
mesh_terms: D000465:Algorithms; D002681:China; D003132:Commerce / Q000191:economics* / Q000379:methods*; D006801:Humans; D007449:Investments / Q000191:economics; D018803:Models, Economic