Do Price Limits Change Investors Behavior: Evidence From the Tunisian Stock Exchange

Abstract

Several stock exchanges are subject to some authorities’ regulations, constraints and limitations such as price limits. In this paper, we address the issue of microstructure effects due to price limits. In particular, stocks returns show a non-normal behavior in the case of price limits. This non-normality could be coming from a change in investors' behavior, valuation effect, or a change in the stock returns statistical properties, value effect. In order to analyze this joint-hypothesis, we defined a new normality test that takes into account the truncation effect, the Truncated Jacobi-Bellman (TJB) test. Our results show that the Value effect has a limited explanation of the stock return behavioral change.