The Effects of Price Limits on Trading Volume: A Study of the Cotton Futures Market

6 Pages Posted: 12 Jul 2007

See all articles by Joan Evans

Joan Evans

Government of the State of Massachusetts

James M. Mahoney

Federal Reserve Bank of New York

Abstract

Will trading volume shift from a market with price limits to a closely related market without them? An examination of the U.S. cotton market reveals that trading volume does in fact move from a class of security that is subject to trading limits (cotton futures) to another that is not (options on cotton futures). The results add to the debate on trading limits by calling into question the limits' overall effectiveness.

Keywords: trading restrictions, price limits, trading volume

JEL Classification: G13, G14, G18

Suggested Citation

Evans, Joan and Mahoney, James M., The Effects of Price Limits on Trading Volume: A Study of the Cotton Futures Market. Current Issues in Economics and Finance Vol. 3, No. 2, January 1997. Available at SSRN: https://ssrn.com/abstract=998879

Joan Evans

Government of the State of Massachusetts ( email )

United States

James M. Mahoney (Contact Author)

Federal Reserve Bank of New York ( email )

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New York, NY 10045
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212-720-1577 (Fax)

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