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The impact of trading halts on liquidity and price volatility: Evidence from the Australian Stock Exchange

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  • Frino, Alex
  • Lecce, Steven
  • Segara, Reuben

Abstract

This study examines market behaviour around trading halts associated with information releases on the Australian Stock Exchange, which operates an open electronic limit order book. Using the Lee, Ready and Seguin (1994) pseudo-halt methodology, we find trading halts increase both volume and price volatility. Trading halts also increase bid-ask spreads and reduce market depth at the best-quotes in the immediate post-halt period. The results of this study imply that trading halts impair rather than improve market quality in markets that operate open electronic limit order books.

Suggested Citation

  • Frino, Alex & Lecce, Steven & Segara, Reuben, 2011. "The impact of trading halts on liquidity and price volatility: Evidence from the Australian Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 19(3), pages 298-307, June.
    • Handle: RePEc:eee:pacfin:v:19:y:2011:i:3:p:298-307
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    4. Carlos Castro & Diego A. Agudelo & Sergio Preciado, 2018. "Measuring the effectiveness of volatility auctions," Documentos de Trabajo CIEF 16988, Universidad EAFIT.
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    7. Tissaoui, Kais & Ftiti, Zied, 2016. "Liquidity, liquidity risk, and information flow: Lessons from an emerging market," Research in International Business and Finance, Elsevier, vol. 37(C), pages 28-48.
    8. Frino, Alex & Prodromou, Tina & Wang, George H.K. & Westerholm, P. Joakim & Zheng, Hui, 2017. "An empirical analysis of algorithmic trading around earnings announcements," Pacific-Basin Finance Journal, Elsevier, vol. 45(C), pages 34-51.
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    11. Carlos Castro & Diego Agudelo & Sergio Preciado, 2017. "Measuring the effectiveness of volatility call auctions," Documentos de Trabajo 15498, Universidad del Rosario.
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