Abstract
ABSTRACT The effect of each trading rule is not completely independent. From the perspective of market differentiation, we establish the linear simultaneous equation model to study the comprehensive influence of the price limit rule and the day trading rule on the quality of China’s stock market and investigate whether it is a synergistic or an anti-synergistic effect. To eliminate the influence of other factors before or after the reform of the trading rules, we establish the difference-in-difference simultaneous equation model for further testing. Results show that when the stock market is divided into the Shanghai A-share market, the Shanghai B-share market, the Shenzhen A-share market, and the Shenzhen B-share market, the simultaneous implementation of the price limit rule and T + 1 trading rule significantly reduces the liquidity and market efficiency of the stock market, significantly increases the volatility of markets, and does harm to the market quality. The interaction effect further aggravates the adverse impact of a single trading rule on the liquidity and market efficiency of the stock market, and weakens the beneficial impact of implementing a single trading rule to stabilize the market. The interaction effect has an anti-synergistic effect, and the results are robust.
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