Do We Need to Recover T + 0 Day Trading Rule? Evidence from Chinese Stock Market

2015-11-01

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In this study, we examine the effects of a change in the day trading rule fromT + 0 toT + 1 for B-shares in Chinese stock market. We remove the influence of adjusting stamp taxes, which happened around the change in the day trading rule. We also apply the difference-in-difference method to remove the effects of other factors that may influence the market quality during the same period. The results show that a change in the day trading rule fromT + 0 toT + 1 will increase price volatility, raise bid-ask spread, reduce the trading activity, and lower the price efficiency.