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Price Discovery around Trading Halts on the Montreal Exchange Using Trade-by-Trade Data

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  • Kryzanowski, Lawrence
  • Nemiroff, Howard

Abstract

This paper investigates the price discovery process around exchange-initiated trading halts using thirty minute trade intervals on the Montreal Exchange. Trading halt price discovery, and regulatory and specialist effectiveness differ over the three time periods studied. Volatility and measures of trade activity increase significantly around trading halts, and return to lower levels in less than two days after the resumption of trading. The number of trades is a good measure of the information flow associated with informed trading pre-halt and the price discovery process post-halt. Copyright 1998 by MIT Press.

Suggested Citation

  • Kryzanowski, Lawrence & Nemiroff, Howard, 1998. "Price Discovery around Trading Halts on the Montreal Exchange Using Trade-by-Trade Data," The Financial Review, Eastern Finance Association, vol. 33(2), pages 195-212, May.
    • Handle: RePEc:bla:finrev:v:33:y:1998:i:2:p:195-212
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    Cited by:

    1. Carlos Castro & Diego Agudelo & Sergio Preciado, 2017. "Measuring the effectiveness of volatility call auctions," Documentos de Trabajo 15498, Universidad del Rosario.
    2. Carlos Castro & Diego A. Agudelo & Sergio Preciado, 2018. "Measuring the effectiveness of volatility auctions," Documentos de Trabajo de Valor Público 16988, Universidad EAFIT.
    3. Martens, Martin & Steenbeek, Onno W., 2001. "Intraday trading halts in the Nikkei futures market," Pacific-Basin Finance Journal, Elsevier, vol. 9(5), pages 535-561, November.
    4. Farag, Hisham, 2015. "The influence of price limits on overreaction in emerging markets: Evidence from the Egyptian stock market," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 190-199.
    5. Castro, Carlos & Agudelo, Diego A. & Preciado, Sergio, 2020. "Measuring the effectiveness of volatility auctions," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 566-581.
    6. Haiwei Chen & Honghui Chen & Nicholas Valerio, 2003. "The effects of trading halts on price discovery for NYSE stocks," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 91-97.
    7. Veld-Merkoulova, Yulia V., 2003. "Price limits in futures markets: effects on the price discovery process and volatility," International Review of Financial Analysis, Elsevier, vol. 12(3), pages 311-328.
    8. Kim, Yong H. & Yagüe, José & Yang, J. Jimmy, 2008. "Relative performance of trading halts and price limits: Evidence from the Spanish Stock Exchange," International Review of Economics & Finance, Elsevier, vol. 17(2), pages 197-215.
    9. Peter‐Jan Engelen & Rezaul Kabir, 2006. "Empirical Evidence on the Role of Trading Suspensions in Disseminating New Information to the Capital Market," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 1142-1167, September.
    10. Ethan Watson & Mary C. Funck, 2012. "A cloudy day in the market: short selling behavioural bias or trading strategy," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 8(3), pages 238-255, June.
    11. Jeff Madura & Nivine Richie & Alan Tucker, 2006. "Trading Halts and Price Discovery," Journal of Financial Services Research, Springer;Western Finance Association, vol. 30(3), pages 311-328, December.
    12. Diego A. Agudelo & Sergio Preciado & Carlos Castro, 2018. "Measuring the effectiveness of volatility auctions," Documentos de Trabajo de Valor Público 16943, Universidad EAFIT.
    13. Shmuel Hauser & Haim Kedar-Levy & Batia Pilo & Itzhak Shurki, 2006. "The Effect of Trading Halts on the Speed of Price Discovery," Journal of Financial Services Research, Springer;Western Finance Association, vol. 29(1), pages 83-99, February.
    14. Imtiaz Mohammad Sifat & Azhar Mohamad, 2019. "Circuit breakers as market stability levers: A survey of research, praxis, and challenges," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 1130-1169, July.

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