Journal of Financial Services Research

, Volume 12, Issue 1, pp 5–20

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

  • Marcelle Arak
  • Richard E Cook
Article

DOI: 10.1023/A:1007955909944

Cite this article as:
Arak, M. & Cook, R.E. Journal of Financial Services Research (1997) 12: 5. doi:10.1023/A:1007955909944

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.

Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Marcelle Arak
    • 1
  • Richard E Cook
    • 1
  1. 1.University of ColoradoDenver