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Stock Market Crashes and the Performance of Circuit Breakers: Empirical Evidence
Author(s) -
LAUTERBACH BENI,
BENZION URI
Publication year - 1993
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1993.tb05133.x
Subject(s) - circuit breaker , crash , monetary economics , stock market crash , leverage (statistics) , stock price , market capitalization , capitalization , stock market , stock (firearms) , business , economics , financial economics , electrical engineering , engineering , computer science , geography , mechanical engineering , paleontology , linguistics , context (archaeology) , philosophy , archaeology , machine learning , series (stratigraphy) , biology , programming language
This study examines the behavior of a small stock market with circuit breakers and with a one‐hour preauction order imbalance disclosure, during the October 1987 crash. The crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta, larger capitalization, and lower leverage firm stocks. Circuit breakers when implemented reduced the next‐day opening order imbalance and the initial price loss; however, they had no effect on the long‐run response. Some price overreaction and reversal phenomena also are documented.