Estimating the effect of price limits on limit‐hitting days
研究了价格限制在触及涨跌停日是否影响均衡价格，通过混合正态分布模型估计冷却或加热效应，发现简单正态模型会错误得出价格限制能冷却股价的结论，而混合正态模型则显示价格限制对收益方差无影响。
This study examines whether price limits affect underlying equilibrium prices on limit‐hitting days. To identify two effects—a ceiling effect and a cooling or heating effect (C–H effect)—we use the fact that equilibrium prices are reached at the day immediately after price limits are hit. We estimate the C–H effect by letting the return series be mixture normal to capture the possible ‘fat tails.’ We apply our models to five randomly selected Taiwanese stocks and all the continuously traded stocks in our sample period. The simple normal density which would lead one to conclude that price limits can ‘cool off’ stock prices is soundly rejected. However, if normal mixture density is used, one would generally conclude that price limits will have no effect on the variance of stock returns.