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Lunch Anyone? Volatility on the Tokyo Stock Exchange around the Lunch Break on May 23, 2013, and Stock Market Circuit Breakers

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Abstract

Stock market circuit breakers halt trading activity on a single stock or an entire exchange if a sudden large price move occurs. Their purpose is to forestall cascading trading activity caused by gaps in liquidity or order errors. Whether circuit breakers achieve this goal is contentious. This post adds to the debate by analyzing intraday price formation on the Tokyo Stock Exchange (TSE) on May 23, 2013?the pinnacle of this past year?s volatility in Japanese stock markets. While no circuit breakers were triggered on the TSE, we focus on trading conditions before and after the daily lunch break, which halted trading amid heightened market volatility on that day. The data seem to indicate that the break did not stem price volatility; rather, its anticipation may have worsened trading conditions.

Suggested Citation

  • David O. Lucca & Or Shachar, 2014. "Lunch Anyone? Volatility on the Tokyo Stock Exchange around the Lunch Break on May 23, 2013, and Stock Market Circuit Breakers," Liberty Street Economics 20140409, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:86937
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    File URL: https://libertystreeteconomics.newyorkfed.org/2014/04/lunch-anyone-volatility-on-the-tokyo-stock-exchange-around-the-lunch-break-on-may-23-2013-and-stock-marke.html
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    Cited by:

    1. Boyarchenko, Nina & Larsen, Lars C. & Whelan, Paul, 2020. "The Overnight Drift," CEPR Discussion Papers 14462, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    equity markets; financial markets; Nikkei index; stock market liquidity; stock market volatility; stock-market circuit breakers;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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