Abstract

http://ssrn.com/abstract=2379029
 


 



Single Stock Circuit Breakers on the London Stock Exchange: Do They Improve Subsequent Market Quality?


James Brugler


University of Cambridge; Bank of England

Oliver B. Linton


University of Cambridge

August 28, 2014


Abstract:     
This paper uses proprietary data to evaluate the efficacy of single-stock circuit breakers on the London Stock Exchange during July and August 2011. Using natural experiments we show that although the marginal effect of suspension length on the market quality of the suspended security is dependent on the history of the trading process, these mechanisms do help to ameliorate the spread of market microstructure noise across securities during falling markets. By preventing the spread of poor market quality across securities in falling markets, circuit breakers can be useful tools for promoting market-wide stability.

Number of Pages in PDF File: 54

Keywords: Circuit breakers, market microstructure, market quality

JEL Classification: G12, G14, G15, G18

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Date posted: January 15, 2014 ; Last revised: September 1, 2014

Suggested Citation

Brugler, James and Linton, Oliver B., Single Stock Circuit Breakers on the London Stock Exchange: Do They Improve Subsequent Market Quality? (August 28, 2014). Available at SSRN: http://ssrn.com/abstract=2379029 or http://dx.doi.org/10.2139/ssrn.2379029

Contact Information

James Brugler (Contact Author)
University of Cambridge ( email )
Faculty of Economics
Cambridge, CB3 9DD
United Kingdom
Bank of England ( email )
Threadneedle Street
London, EC2R 8AH
United Kingdom
Oliver B. Linton
University of Cambridge ( email )
Faculty of Economics
Cambridge, CB3 9DD
United Kingdom
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