Impact of Asymmetric information for Rising Magnet Effect on Price Limit at Tehran Stock Exchange
Subject Areas : Financial engineering
M. Feyz Fallah Shams
1
,
Marziyeh Eskandari
2
1 - Associate Prof., Faculty of Management, Islamic Azad University (central Tehran branch) Tehran, Iran
2 - Graduate of the Master of Science and Research Branch, Islamic Azad University, Tehran, Iran
Keywords: Information Asymmetry, Permitted range of oscillation, pseudo-oscillation, abusive effect,
Abstract :
In many of the world’s stock exchanges, legislators specify price limits in order to reduce market volatility and reduce investors’ loss as a result of emotional decisions. One of the disadvantages of such an action is magnet effect of price limits, leading to a behavioral bias. In this study, the effects of information asymmetry on the presence of magnet effect of price limits were examined with regard to daily data obtained from 25 companies listed on the Tehran Stock Exchange during 2013-2015. First, the presence or absence of magnet effects in stock prices of these companies was examined using conditional volatility models. Then, the effect of information asymmetry on the presence of magnet effect was studied using the logit regression model. The study results revealed that the magnet effect of price limits exists in the studied companies and there was a significant relationship between information asymmetry and magnet effect.
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