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Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988)

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  • Bhattacharya, Utpal
  • Spiegel, Matthew

Abstract

A cross-sectional analysis of all trading suspensions that occurred during the period 1974-88 in the New York Stock Exchange reveals that, though the desire to maintain price continuity remains an important motivation to suspend trade, inventory-imbalance fears are pronounced for large firms. Adverse-selection concerns afflict all news-related suspensions irrespective of firm size. Furthermore, the authors find substitutability among the various dimensions of liquidity: although large-cap stocks have lower bid-ask spreads, they halt more often. A time series analysis shows that the resiliency of the exchange--its ability to absorb severe volatility shocks--has improved in this period.

Suggested Citation

  • Bhattacharya, Utpal & Spiegel, Matthew, 1998. "Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988)," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 216-226, April.
    • Handle: RePEc:bes:jnlbes:v:16:y:1998:i:2:p:216-26
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    Cited by:

    1. Félez-Viñas, Ester, 2026. "When protection backfires: How short selling bans weaken market resiliency," Finance Research Letters, Elsevier, vol. 87(C).
    2. O’Sullivan, Conall & Papavassiliou, Vassilios G. & Wafula, Ronald Wekesa & Boubaker, Sabri, 2024. "New insights into liquidity resiliency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 90(C).
    3. Adrian Buss & Bernard Dumas, 2019. "The Dynamic Properties of Financial‐Market Equilibrium with Trading Fees," Journal of Finance, American Finance Association, vol. 74(2), pages 795-844, April.
    4. Sun, Chentong & Yi, Shangkun & Wu, Fenglin & Li, Yanshuang & Dong, Zibing, 2025. "Mainshocks and aftershocks: Assessing the resilience of Asia-Pacific stock markets amid global financial cycle shocks," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    5. Hans Degryse & Frank De Jong & Maarten Van Ravenswaaij & Gunther Wuyts, 2005. "Aggressive Orders and the Resiliency of a Limit Order Market," Review of Finance, European Finance Association, vol. 9(2), pages 201-242.
    6. Chakrapani Chaturvedula & Nikhil Rastogi, 2018. "The Effectiveness of Price Bands on Emerging Markets: Evidence from India," Accounting and Finance Research, Sciedu Press, vol. 7(4), pages 195-195, November.
    7. Yun Ke & Kin Lo & Jinfei Sheng & Jenny Li Zhang, 2023. "Do investors affect financial analysts’ behavior? Evidence from short sellers," Financial Management, Financial Management Association International, vol. 52(1), pages 199-224, March.
    8. Yong H. Kim & J. Jimmy Yang, 2004. "What Makes Circuit Breakers Attractive to Financial Markets? A Survey," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 13(3), pages 109-146, August.
    9. Carolyn B. Levine & Michael J. Smith, 2003. "Ex Post Voluntary Disclosure Strategies for Insiders," Contemporary Accounting Research, John Wiley & Sons, vol. 20(4), pages 719-746, December.
    10. Hautsch, Nikolaus & Horvath, Akos, 2019. "How effective are trading pauses?," Journal of Financial Economics, Elsevier, vol. 131(2), pages 378-403.
    11. G. Wuyts, 2007. "Stock Market Liquidity.Determinants and Implications," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 279-316.
    12. Spiegel, Matthew & Subrahmanyam, Avanidhar, 2000. "Asymmetric Information and News Disclosure Rules," Journal of Financial Intermediation, Elsevier, vol. 9(4), pages 363-403, October.
    13. Tang, Chun & Liu, Xiaoxing & Zhou, Donghai, 2022. "Financial market resilience and financial development: A global perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    14. Cheoljun Eom & Steven J. Jordan & Woo‐Baik Lee & Jong Won Park, 2020. "Programs trades and trade regulation: An evidence of the Korean securities market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 44-66, January.
    15. Kenneth A. Kim & Jungsoo Park, 2010. "Why Do Price Limits Exist in Stock Markets? A Manipulation†Based Explanation," European Financial Management, European Financial Management Association, vol. 16(2), pages 296-318, March.
    16. Xu, Dandan & Liu, Yuting, 2024. "How does technological progress affect provincial financial resilience? Evidence at the provincial level in China," Emerging Markets Review, Elsevier, vol. 60(C).

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