An analysis of the magnet effect under price limits

Daphne Yan Du, Qianqiu Liu, Sangghon Rhee

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Using the Korea Stock Exchange s transaction data and limit order book, we document the accelerating patterns of market activity before limit hits. We confirm the existence of the magnet effect from several key market microstructure variables, using a parsimonious quadratic function of the time until the price limit hit. In addition, this paper is the first to isolate the intraday momentum effect from the magnet effect during the period before stock prices hit daily price limits.
Original languageEnglish
Pages (from-to)83 - 110
Number of pages28
JournalInternational Review of Finance
Volume9
Issue number1-2
DOIs
Publication statusPublished - 2009
Externally publishedYes

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