This paper undertakes a comprehensive evaluation of the efficacy of firm-specific trading halts in the Malaysian context. The paper examines a total of 291 trading halts that occurred over the five year period 2000 to 2004. In addition to examining the three variables commonly impacted by trading halts, stock price reaction, volatility of returns and trading volume, we also examine four additional parameters that could have material impact. These are (i) the type of halt whether voluntary or mandatory, (ii) type of news released, (iii) duration of halt and (iv) frequency. Based on our overall sample, trading halts result in a positive price reaction, increased volume and volatility. We find evidence of information leakage, significant difference between voluntary and mandatory halts and the type of news released during halt to have a huge impact. The duration of halt has isolated impact and is largely inconsequential. The frequency of halts does not seem to matter. While these results broadly conform with previous studies of trading halts in other markets, our refined analysis by subcategory showed some interesting differences. The two key differences were the significantly positive price reaction for the sample of mandatory halts and the lower volatility for voluntary halts. We attribute the positive price reaction of mandatory halts to the peculiarity of regulation and the resulting survivor bias. We argue that the lower volatility for voluntary halts particularly for those in the good news category, imply that these stocks are being repriced. With the exception of some subsets, our overall results appear to be strongly supportive of The Price Efficiency hypothesis of trading halts which argues that trading halts help disseminate information and enhance the price discovery process.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13077.
Length: Date of creation: Mar 2008 Date of revision: Publication status: Published in The International Journal of Banking and Finance 2.5(2008): pp. 125-148 Handle: RePEc:pra:mprapa:13077
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