Transitory Price Changes and Price-Limit Rules: Evidence from the Tokyo Stock Exchange

Posted: 10 Oct 1998 Last revised: 12 Mar 2008

See all articles by Thomas J. George

Thomas J. George

University of Houston - Department of Finance

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Abstract

We compare the volatility of 24-hour returns computed from the opening and closing prices of a diverse sample of Tokyo Stock Exchange (TSE) stocks. We find that volatility at the open is greater than volatility at the close only for the most actively traded TSE stocks. Daytime and overnight return covariances suggest that the volatility patterns are explained by the effect of implicit bid-ask spreads at the open and partial price adjustment at the close, both of which are related to the intensity of trading. Our results challenge the view that open-to-open returns are more volatile than close-to-close returns for stocks in general, and are consistent with the hypothesis that TSE price limit rules have a significant impact on the dynamics of security prices.

JEL Classification: G15

Suggested Citation

George, Thomas J. and Hwang, Chuan-Yang, Transitory Price Changes and Price-Limit Rules: Evidence from the Tokyo Stock Exchange. Journal of Financial and Quantitative Analysis (JFQA), Vol. 30, No. 2, June 1995. Available at SSRN: https://ssrn.com/abstract=6366

Thomas J. George (Contact Author)

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States

Chuan-Yang Hwang

Nanyang Technological University (NTU) ( email )

Singapore, 639798
Singapore
65-67905003 (Phone)
65-6791-3697 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
793
PlumX Metrics