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Stock Market Crashes and the Performance of Circuit Breakers: Empirical Evidence


  • Lauterbach, Beni
  • Ben-Zion, Uri


This study examines the behavior of a small stock market with circuit breakers and with a one-hour preauction order imbalance disclosure during the October 1987 crash. The crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta, larger capitalization, and lower leverage firm stocks. Circuit breakers when implemented reduced the next-day opening order imbalance and the initial price loss; however, they had no effect on the long-run response. Some price overreaction and reversal phenomena also are documented. Copyright 1993 by American Finance Association.

Suggested Citation

  • Lauterbach, Beni & Ben-Zion, Uri, 1993. "Stock Market Crashes and the Performance of Circuit Breakers: Empirical Evidence," Journal of Finance, American Finance Association, vol. 48(5), pages 1909-1925, December.
  • Handle: RePEc:bla:jfinan:v:48:y:1993:i:5:p:1909-25

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