Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988)
Utpal Bhattacharya
Indiana University Bloomington - Department of Finance
Matthew I. Spiegel
Yale University - Yale School of Management, International Center for Finance
Abstract:
A cross-sectional analysis of all trading suspensions that occurred during the period 1974-1988 in the New York Stock Exchange reveals that though the desire to maintain price continuity remains an important motivation to suspend trade, inventory imbalance fears are pronounced for large firms. Adverse selection concerns afflict all news related suspensions irrespective of firm size. Further, we find substitutability amongst the various dimensions of liquidity: while large cap stocks have lower bid-ask spreads, they halt more often. A time-series analysis shows that the resiliency of the exchange -- its ability to absorb severe volatility shocks -- has improved in this period.
Number of Pages in PDF File: 33
Keywords: Trading halts; Market resiliency; Liquidity; Inventory control; Adverse selection
JEL Classification: G10, G14
working papers series
Suggested Citation
Bhattacharya , Utpal and Spiegel, Matthew I., Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988). Available at SSRN: http://ssrn.com/abstract=2070 or http://dx.doi.org/10.2139/ssrn.2070
