We theoretically examine whether and how price limit expansion changes return volatility. This study incorporates competing hypotheses regarding investor reactions to limit-hit events into a model that considers trader irrationality; we then conduct several simulations. We find that, when price limits are widened, stock return volatility tends to increase but may also remain unchanged or decrease. We consider the implications of the study’s main findings, which shed light on the mixed empirical results found in the price limit literature so far.

中文翻译：

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价格限制扩张和波动：理论视角*

我们从理论上研究了价格限制扩张是否以及如何改变回报波动率。本研究将有关投资者对限价事件反应的竞争假设纳入考虑交易者非理性的模型中；然后我们进行了几次模拟。我们发现，当价格限制放宽时，股票收益波动率趋于增加，但也可能保持不变或下降。我们考虑了该研究主要发现的意义，这些发现阐明了迄今为止在价格限制文献中发现的混合实证结果。