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Trading Halts and Price Informativeness

Author

Listed:
  • Crocker Herbert Liu

    (Cornell University)

  • Charles Trzcinka

    (Indiana University)

  • Ziwei Zhao

    (University of Lausanne; Swiss Finance Institute)

Abstract

Chinese firms can initiate trading halts. While many plausible reasons exist for halts to occur after a price decline: 42% of halts come after a 7-day price rise. We argue the only reason for halts after a price rise is to increase management information. We find that our measures of private information are negatively associated with the likelihood of a halt. However, halts increase the cost of capital by 121 basis points. We show that price non-synchronicity, institutional ownership, and accounting variables predict a trading halt and explain the positive CARs after a halt.

Suggested Citation

  • Crocker Herbert Liu & Charles Trzcinka & Ziwei Zhao, 2023. "Trading Halts and Price Informativeness," Swiss Finance Institute Research Paper Series 23-62, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2362
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    More about this item

    Keywords

    trading; halts; fundamentals; noise traders; liquidity;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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