Intraday Rallies and Crashes: Spillovers of Trading Halts

46 Pages Posted: 30 Oct 2015 Last revised: 16 May 2016

See all articles by Bei Cui

Bei Cui

Monash Centre for Financial Studies, Monash Business School, Monash University

Arie Eskenazi Gozluklu

University of Warwick - Finance Group

Date Written: May 15, 2016

Abstract

This paper analyses a set of intraday rally and crash events at the firm level during the single stock circuit breaker (SSCB) 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 arbitrage channel. We find that extreme 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.

Keywords: circuit breakers, trading halts, arbitrage, momentum, pairs trading

JEL Classification: G12, G14, G18, G28

Suggested Citation

Cui, Bei and Gozluklu, Arie Eskenazi, Intraday Rallies and Crashes: Spillovers of Trading Halts (May 15, 2016). Available at SSRN: https://ssrn.com/abstract=2682462 or http://dx.doi.org/10.2139/ssrn.2682462

Bei Cui

Monash Centre for Financial Studies, Monash Business School, Monash University ( email )

13/f 30 Collins Street
Melbourne, Victorial 3000
Australia

Arie Eskenazi Gozluklu (Contact Author)

University of Warwick - Finance Group ( email )

Warwick Business School
Coventry, CV4 7AL
Great Britain

HOME PAGE: http://www.ariegozluklu.com

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