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Intraday Rallies and Crashes: Spillovers of Trading Halts

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  • Bei Cui
  • Arie E. Gozluklu

Abstract

This paper analyses a set of intraday rally and crash events at the firm level during the single‐stock circuit breaker program and documents the cross‐sectional spillover effects of such events on non‐halted stocks. We test whether such major price jumps, and subsequent trading halts, affect related stocks through the destabilizing eme price movements that trigger the circuit breakers at the firm level are accompanied by a massive surge in volume, spread and short‐term volatility, which gradually revert back to normal. Speculative strategies of arbitrageurs such as momentum and pairs trading cause cross‐sectional spillovers in volume and volatility during the trading halt. Copyright © 2016 John Wiley & Sons, Ltd.

Suggested Citation

  • Bei Cui & Arie E. Gozluklu, 2016. "Intraday Rallies and Crashes: Spillovers of Trading Halts," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 472-501, October.
    • Handle: RePEc:wly:ijfiec:v:21:y:2016:i:4:p:472-501
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    Cited by:

    1. Yang, Haijun & Ge, Hengshun & Gao, Xinpeng, 2022. "An information diffusion model for momentum effect based on investor wealth," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    2. Abad, David & Massot, Magdalena & Pascual, Roberto, 2018. "Evaluating VPIN as a trigger for single-stock circuit breakers," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 21-36.
    3. 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.
    4. Gang Chu & Xiao Li & Dehua Shen & Yongjie Zhang, 2021. "Stock Crashes and Jumps Reactions to Information Demand and Supply: An Intraday Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 397-427, September.
    5. Zhihong Jian & Zhican Zhu & Jie Zhou & Shuai Wu, 2018. "The Magnet Effect of Circuit Breakers: A role of price jumps and market liquidity," Departmental Working Papers 2018-01, The University of Winnipeg, Department of Economics.
    6. Wong, Kin Ming & Kong, Xiao Wei & Li, Min, 2020. "The magnet effect of circuit breakers and its interactions with price limits," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    7. Sifat, Imtiaz Mohammad & Mohamad, Azhar, 2020. "A survey on the magnet effect of circuit breakers in financial markets," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 138-151.
    8. Jian, Zhihong & Zhu, Zhican & Zhou, Jie & Wu, Shuai, 2020. "Intraday price jumps, market liquidity, and the magnet effect of circuit breakers," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 168-186.

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