We extend the existing studies on price limits by testing the return characteristics surrounding intraday price limits. We exclude limit hits that last through end of the day (interday limit hits) and consider the pre-event directions of price movements, as well as firm size. A set of stocks that experience large price changes but do not hit the limits is identified as controlled samples. Comparing the hit and non-hit samples, we show that intraday price limits do not seem to have strong influences on the return dynamics. Directions of pre-event price movements are more important in explaining the return characteristics and firm size is also found to affect the intraday return dynamics.
Journal of Multinational Financial Management, 14(4/5), 485-501