Price Bands and Their Effects on Equity Markets: Evidence from a Natural Experiment

Vladimir A. Gatchev*, Rama Seth, Ajai Singh, S. R. Vishwanatha

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review


We exploit a unique experiment, where the intraday price moves of Indian IPO listings are restricted within a narrow band, to examine the consequences of price bands for stock prices, investor trading behavior, and stock market liquidity. Based on difference-in-differences estimations, we find that price bands lead to a significant reduction in the price variability of IPO stocks. The decrease in variability is accompanied by increases in post-IPO selling by individual investors, the price impact of trades, and IPO expected returns. Bid-ask spreads remain similar. The findings provide new evidence on the effects of intraday price bands on equity markets.
TidsskriftJournal of Financial Markets
Antal sider18
StatusUdgivet - nov. 2023

Bibliografisk note

Published online: 27 May 2023.


  • Price limits
  • Stock market liquidity
  • Investor trading behavior
  • Asset prices
  • IPOs