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Do Daily Price Limits Act as Magnets? The Case of Treasury Bond Futures

Do Daily Price Limits Act as Magnets? The Case of Treasury Bond Futures This article examines price behavior in the U.S. Treasury bond futures market in the mornings after large overnight price moves, using data from 1980 to 1987. The article tests whether price behavior is affected by proximity to a price limit, and whether the effect is a magnet effect or a calming effect. In that period, the price tends to reverse direction after the morning open, and the reversal appears to reflect a calming effect of the price being close to the limit. An alternative hypothesis—that morning price behavior reflects the overnight price change rather than proximity to the price limit per se—is also tested, and does not perform as well in explaining price behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Services Research Springer Journals

Do Daily Price Limits Act as Magnets? The Case of Treasury Bond Futures

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References (13)

Publisher
Springer Journals
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Finance; Financial Services; Macroeconomics/Monetary Economics//Financial Economics
ISSN
0920-8550
eISSN
1573-0735
DOI
10.1023/A:1007955909944
Publisher site
See Article on Publisher Site

Abstract

This article examines price behavior in the U.S. Treasury bond futures market in the mornings after large overnight price moves, using data from 1980 to 1987. The article tests whether price behavior is affected by proximity to a price limit, and whether the effect is a magnet effect or a calming effect. In that period, the price tends to reverse direction after the morning open, and the reversal appears to reflect a calming effect of the price being close to the limit. An alternative hypothesis—that morning price behavior reflects the overnight price change rather than proximity to the price limit per se—is also tested, and does not perform as well in explaining price behavior.

Journal

Journal of Financial Services Research – Springer Journals

Published: Sep 29, 2004

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