Stock Market Efficiency and Price Limits: Evidence from Korea’s Recent Expansion of Price Limits


H. R. Seddighi, Il-Hyun Yoon

Abstract


This paper examines the efficiency of the Korean stock exchange market with reference to the recent relaxation of price limits effective on June 15, 2015 for the period from January 2012 to November 2017 and compares the efficiency between sub-periods before and after the police change which saw expansion of daily price limits from 15% to 30%. The daily returns of the market index and 60 stocks selected from different industrial sectors are used to test the random walk hypothesis under two different price limits regime using the Lo-MacKinlay variance ratio tests and multiple variance ratio tests. The empirical evidence found that the market index showed weak form market efficiency along the lines of random walk hypothesis while individual sample stocks behaved differently according to the different price limits periods. The number of stocks following the random walk process increased under the 30% price limits regime in comparison with that under the 15% regime, indicating Korea’s stock market appears to become more efficient as daily price limits are expanded although the findings are rather suggestive than  definitive.

Keywords


Daily price limits, Efficient market hypothesis, Korean stock market, KOSPI, Multiple variance ratio tests, Random walk process

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About this article

Title

Stock Market Efficiency and Price Limits: Evidence from Korea’s Recent Expansion of Price Limits

Keywords

Daily price limits, Efficient market hypothesis, Korean stock market, KOSPI, Multiple variance ratio tests, Random walk process

DOI

10.20448/journal.501.2018.52.191.200

Date

2018-09-10

Additional Links

Manuscript Submission

Journal

Asian Journal of Economics and Empirical Research
Vol 5, No 2 (2018) Page: 191-200

Print ISSN

2518-010X

Online ISSN

2409-2622

Statistics

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Citations

0

Authors & Affiliations

H. R. Seddighi
Business School, University of Sunderland, St. Peter’s Campus, St. Peters Way, Sunderland, Tyne and Wear SR6 0DD
United Kingdom

Il-Hyun Yoon
Division of Business Administration, Dongseo University, 47 Jurye-ro, Sasang-gu, Busan 47011
Korea, Republic of


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Asian Journal of Economics and Empirical Research

 Online ISSN: 2409-2622 | Print ISSN: 2518-010X

 

 

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