Abstract

http://ssrn.com/abstract=2379029
 


 



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


James Brugler


University of Cambridge, Faculty of Economics, Students

Oliver B. Linton


University of Cambridge

May 27, 2015


Abstract:     
This paper uses proprietary data to evaluate the efficacy of single-security circuit breakers on the London Stock Exchange. Using natural experiments, we show that although the marginal effect of suspension length on the market quality of the suspended security is insignificant, these mechanisms do help to ameliorate the spread of noise in the price process across securities during falling markets. Since circuit breakers help to prevent contagion of poor market quality across securities without leading to worse market quality for the suspended security, they can therefore be useful tools for promoting market-wide stability.

Number of Pages in PDF File: 38

Keywords: Circuit breakers, market microstructure, market quality

JEL Classification: G12, G14, G15, G18


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Date posted: January 15, 2014 ; Last revised: June 4, 2015

Suggested Citation

Brugler, James and Linton, Oliver B., Single-Security Circuit Breakers on the London Stock Exchange: Do They Improve Subsequent Market Quality? (May 27, 2015). 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, Faculty of Economics, Students ( email )
Cambridge
United Kingdom
Oliver B. Linton
University of Cambridge ( email )
Faculty of Economics
Cambridge, CB3 9DD
United Kingdom
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