Price Limits and Volatility: A New Approach and Some New Empirical Evidence from the Tokyo Stock Exchange

Abstract

This study aims to examine regularities of price limit hits for stocks listed in the TSE. Regularities of limit hits have not been examined before. The results show an increase of limit hits on Monday and Tuesday. These results of limit hits are consistent with the existing literature for the day-of-the-week effect of stock returns carried out on Japan. This indicates that such patterns of price limit hits are not all due to noise trading. The results also show that high limit hit occurrences are associated with high volatility and low limit hit occurrences are associated with low volatility.