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Investigating The Impact Of Widening Price Limits On Volatility: The Experience Of The Nigerian Stock Exchange, Mohmmed A. Yadudu
Investigating The Impact Of Widening Price Limits On Volatility: The Experience Of The Nigerian Stock Exchange, Mohmmed A. Yadudu
Bullion
This paper empirically evaluates the impact of return volatility from widening price limits from 5% to 10% on the Nigerian Stock Exchange(NSE) on September 18, 2012 using a Stochastic Volatility model in an event study framework. Using daily trading data from September 2010 to September 2014, the study finds that widening of price limits in the NSE has not increased volatility as feared by some regulators. Stocks with higher free floats and institutional ownership display lower volatility when price limits are widened. This suggests that smaller stock exchanges can improve market efficiency by widening price limits without increasing volatility. The …