Abstract
This research examines the effects of changes in daily price limit policy on the Taiwan stock market. It is based on the daily trading record from the period 1 January 1999 to 31 December 2001, a total of 781 daily record data sets. By applying the intervention model (IVM) of event study and adjusting outliers, the study incorporates with the transfer function model (TFARMA) in time series to make an empirical investigation. The empirical findings show that of the six periods of changed price limits, three had a significantly positive effect on stock returns, two had no significant effect, and one had a significantly negative effect.
Acknowledgements
This project is under the patronage of the National Science Council, Taiwan (NSC93-2416-H-305-004). All remaining errors are ours.
Notes
1 Such studies include Shen and Wang (Citation1998), Huang et al. (Citation2001), Kim (Citation2001), Cho et al. (Citation2003). In contrast to discrete models in the previous research, which do not take into account the attribute of time series, this study applies the intervention model and the transfer function model to time series data on stock returns, trading volume and price limits policy. This approach is more appropriate for real stock market circumstances.