Journal of Banking & Finance Vol. 36 No. 2 2012
A unique “T+1 trading rule” in China: Theory and evidence
Abstract
Unique to the world, China adopts a “T+1 trading rule”, which prevents investors from selling stocks bought on the same day. We develop a dynamic price manipulation model to study the effects of the “T+1 trading rule”. Compared to the “T+0 trading rule”, which allows investors to buy and sell the same stocks during the same day, we show that the “T+1 trading rule” reduces the total trading volume and price volatility, and improves the trend chasers’ welfare when trend-chasing is strong. An empirical test using data on China’s B-share stock market supports the model’s theoretical predictions.
- DOI
- 10.1016/j.jbankfin.2011.09.002
- Volume
- 36
- Issue
- 2
- Pages
- 575-583
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib