EFEKTIVITAS PRICE LIMIT DI BURSA EFEK INDONESIA

• Main Authors: , Nurwidianto, SE., , Dr. Mamduh M. Hanafi, MBA.
• Format: Theses and Dissertations NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2014
• Subjects: ETD
• Online Access: https://repository.ugm.ac.id/134068/; http://etd.ugm.ac.id/index.php?mod=penelitian_detail&sub=PenelitianDetail&act=view&typ=html&buku_id=75046
• Institution: Universitas Gadjah Mada

Some stock markets have employed price limit to prevent market crash. The question about the effectiveness of price limit has long attracted research interest. Price limit advocates claim that price limits decrease stock return volatility, counter overreaction, and do not interfere with trading activity. Conversely, price limit critics claim that price limits cause higher volatility levels on subsequent days, prevent prices from efficiently reaching their equilibrium level, and interfere with trading due to limitations imposed by price limits. Empirical research does not provide conclusive support for either positions. This study empirically investigates the effectiveness of price limit on volatility and overreaction, using the data from the Indonesia Stock Exchange, over the years 2000-2005. More specifically this study examines whether lowering daily return volatility for stock-hit price limit was the greater in the post limit hit period than the stock control groups. Beside that, this study also examined of the phenomenon of short-term overreaction. Empirical results from this study indicate that the firstly, volatility after price limit implementation shows highest level than before. Second, the results show that stocks limit hit experiences the highest level of volatility on the day when stock reach their upper limit and then decreased significantly after limit hit. Third, the findings indicate the occurrence of short-term overreaction for the upward stock price movement and downward stock price movement.