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Intraday Rallies and Crashes: Spillovers of Trading Halts
Author(s) -
Cui Bei,
Gozluklu Arie E.
Publication year - 2016
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1556
Subject(s) - spillover effect , economics , volatility (finance) , monetary economics , stock (firearms) , arbitrage , financial economics , crash , stock price , macroeconomics , mechanical engineering , biology , computer science , engineering , programming language , paleontology , series (stratigraphy)
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.