The Cross-Sectional Spillovers of Single Stock Circuit Breakers
James A Brugler
University of Melbourne - Department of Finance
Oliver B. Linton
University of Cambridge
February 22, 2016
This paper uses transaction data to estimate the effect of single stock circuit breakers on other stocks that remain in continuous trading (the “spillover effect”). We find that circuit breakers lead to significant trading, volatility and price spillovers for stocks that remain in continuous trading and that this is driven primarily by traders hedging against further mark-to-market losses in the suspended stock. The effect is stronger when market-wide volatility is relatively high, however when stock prices are highly correlated, circuit breakers play a more beneficial role.
Number of Pages in PDF File: 41
Keywords: Circuit breakers, market microstructure, market quality
JEL Classification: G12, G14, G15, G18
Date posted: January 15, 2014 ; Last revised: February 27, 2016
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
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