Relaxing Daily Price Limits and Stock Market Cross-Correlation: Evidence from MF-X-DMA Analysis

Author:

Ruan Qingsong1,Hu Sumiya1,Zhang Jiarui1,Chu Xiaolin2,Lv Dayong2ORCID

Affiliation:

1. School of Economics and Management, Tongji University, Shanghai 200092, P. R. China

2. School of Financial Technology, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, P. R. China

Abstract

The daily price limits in the ChiNext stock market were relaxed from [Formula: see text]% to [Formula: see text]% on 24 August 2020. Using the multifractal detrended moving average cross-correlation analysis (MF-X-DMA) method, we find that relaxing daily price limits leads to a greater degree of multifractality of the ChiNext stock market, suggesting that the relaxation of daily price limits harms stock market efficiency. In addition, the positive cross-correlation between ChiNext and Chinese main board stock markets becomes weaker, i.e., relaxing daily price limits also decreases the connection between ChiNext and other stock markets. Moreover, there is an increase in the degree of the cross-correlation multifractality between ChiNext and Chinese main board stock markets, suggesting that the linkage of ChiNext and other stock markets is more complicated and risky after the relaxation of daily price limits. Our findings fulfill related literature from the perspective of multifractality and have important implications for investors.

Funder

Humanities and Social Science Fund of Ministry of Education of the People's Republic of China

National Natural Science Foundation of China

Scientific and Innovative Action Plan of Shanghai

Shuguang Program of Shanghai Education Development Foundation and Shanghai Municipal Education Commission

Publisher

World Scientific Pub Co Pte Ltd

Subject

General Physics and Astronomy,General Mathematics

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