The impact of price limit on the stock behaviors: Evidence from Ho Chi Minh stock exchange (HOSE)
Abstract
In 2008, trading regulations on Vietnam Stock Exchange, which includes both Ho Chi Minh Stock Exchange and Ha Noi Security Center, have implemented some changes on the imposed price limit. There were four times changing up and down during 2008. On Ho Chi Minh Stock Exchange, price limit is currently 5%. On
Ha Noi Security Center has a current price limit at 7%. There are many investors question about whether the exchange should keep the price limit regulation or not, and
at which level.
This paper attempts to analyze the effectiveness of price limit regulation in Vietnam Stock Exchange during the period 2009-2011, evidence from Ho Chi Minh Security Center. Employing the approach proposed by Kim et al. (1997), this study aim to find supporting evidences for the hypotheses of volatility spillover, trading interference. Using event study, this study purposes to examine the difference between pre-hit period and post-hit period for those stocks that hit their limits. As the result, throughout the academic findings, this study will open to the regulators a better
view of the impacts of the price limits.