The Impact of Daily Return Limit and Segmented Clientele on Stock Returns in China

36 Pages Posted: 14 Mar 2009 Last revised: 17 Sep 2010

See all articles by Haim Kedar-Levy

Haim Kedar-Levy

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

Xiaoyan Yu

Ryukoku University

Akiko Kamesaka

Aoyama Gakuin University

Uri Ben-Zion

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management; National Bureau of Economic Research (NBER)

Date Written: 2010

Abstract

Mean and variance of daily type-A and B stock returns in Shanghai and Shenzhen exchanges are studied before and after these stocks were subject to a -10% daily return limit, and when investors' clientele were segmented, vs. merged. We find that imposing the -10% return limit significantly reduced the variance of type A stocks, but increased the variance of type B stocks. This puzzle appears to be related to different liquidity effects. Merging clienteles across stock types reduced their risk, increased mean return, and improved efficiency. Returns were generated primarily at the opening (type-A) or trading day (type-B) before the clienteles merged, but in a mixed format thereafter.

Keywords: China; Anomalies; Momentum; Reversal; Clientele

JEL Classification: G14, G15

Suggested Citation

Kedar-Levy, Haim and Yu, Xiaoyan and Kamesaka, Akiko and Ben-Zion, Uri, The Impact of Daily Return Limit and Segmented Clientele on Stock Returns in China (2010). International Review of Financial Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1358875 or http://dx.doi.org/10.2139/ssrn.1358875

Haim Kedar-Levy (Contact Author)

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
(972) 8 6472569 (Phone)
(972) 8 6477697 (Fax)

Xiaoyan Yu

Ryukoku University ( email )

67 Tsukamoto-cho, Fukakusa
Fushimi-ku
Kyoto, Kyoto 612-857
Japan

Akiko Kamesaka

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

Uri Ben-Zion

Technion-Israel Institute of Technology - The William Davidson Faculty of Industrial Engineering & Management ( email )

Haifa 32000
Israel
(972-4) 829-4432 (Phone)
(972-4) 829-5688 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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