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SWITCHING TO A TEMPORARY CALL AUCTION IN TIMES OF HIGH UNCERTAINTY
Author(s) -
Abad David,
Pascual Roberto
Publication year - 2010
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2010.01262.x
Subject(s) - stock (firearms) , limit (mathematics) , volatility (finance) , price discovery , circuit breaker , economics , monetary economics , stock price , financial economics , econometrics , business , electrical engineering , mathematics , series (stratigraphy) , geography , engineering , mathematical analysis , paleontology , biology , futures contract , archaeology
We evaluate a stock‐specific circuit breaker implemented in several European stock exchanges, which consists of a short‐lived call auction triggered by intraday stock‐specific price limits. It differs from U.S. trading halts in that it is short‐lived and nondiscretionary, and a trading mechanism (continuous or discrete) is always going. It differs from daily price limits in that trade prices are not restricted once the limit is hit. Intraday price ranges are smaller and adjusted to the recent volatility, so that limit hits are more frequent. We contribute to the debate about circuit breakers by enlarging the span of these mechanisms studied.