The effects of trading halts on price discovery for NYSE stocks
This article uses intraday data for the year 1992 to investigate the effect of trading halts on price discovery for stocks traded on the New York Stock Exchange. The results show that the degree of benefits from trading halts depends on the types of halts and significance of the news items. It is found that trading halts reduce price dispersion when trading is halted due to imbalance in order flows. Such a positive effect is robust to the significance of news items. Trading halts can help price discovery when trading is halted due to the fact that some significant news items already hit the market and investors need more time to digest the impacts on price. In contrast, when officials call for the halt due to the pending news release with little significance, trading halts actually inject more noise into the prices and undermine the price discovery process. Overall, the results are consistent with the argument by exchanges that trading halts help dissipate information and facilitate the price discovery process.
Volume (Year): 35 (2003)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hopewell, Michael H & Schwartz, Arthur L, Jr, 1978. "Temporary Trading Suspensions in Individual NYSE Securities," Journal of Finance, American Finance Association, vol. 33(5), pages 1355-1373, December.
- Kim, Kenneth & Rhee, S Ghon, 1997. " Price Limit Performance: Evidence from the Tokyo Stock Exchange," Journal of Finance, American Finance Association, vol. 52(2), pages 885-899, June.
- Michael A. Goldstein & Kenneth A. Kavajecz, "undated".
"Liquidity Provision during Circuit Breakers and Extreme Market Movements,"
Rodney L. White Center for Financial Research Working Papers
01-00, Wharton School Rodney L. White Center for Financial Research.
- Michael A. Goldstein & Kenneth A. Kavajecz, "undated". "Liquidity Provision during Circuit Breakers and Extreme Market Movements," Rodney L. White Center for Financial Research Working Papers 1-00, Wharton School Rodney L. White Center for Financial Research.
- Shane A. Corwin & Marc L. Lipson, 2000. "Order Flow and Liquidity around NYSE Trading Halts," Journal of Finance, American Finance Association, vol. 55(4), pages 1771-1805, 08.
- William G. Christie & Shane A. Corwin & Jeffrey H. Harris, 2002. "Nasdaq Trading Halts: The Impact of Market Mechanisms on Prices, Trading Activity, and Execution Costs," Journal of Finance, American Finance Association, vol. 57(3), pages 1443-1478, 06.
- Brown, Keith C. & Harlow, W. V. & Tinic, Seha M., 1988. "Risk aversion, uncertain information, and market efficiency," Journal of Financial Economics, Elsevier, vol. 22(2), pages 355-385, December.
- De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
- Fabozzi, Frank J & Ma, Christopher K, 1988. "The Over-the-Counter Market and New York Stock Exchange Trading Halts," The Financial Review, Eastern Finance Association, vol. 23(4), pages 427-437, November.
- Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
- 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. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:35:y:2003:i:1:p:91-97. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.