41 Pages Posted: 15 Jan 2014 Last revised: 27 Feb 2016
Date Written: 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.
Keywords: Circuit breakers, market microstructure, market quality
JEL Classification: G12, G14, G15, G18
Suggested Citation: Suggested Citation
Brugler, James A and Linton, Oliver B., The Cross-Sectional Spillovers of Single Stock Circuit Breakers (February 22, 2016). Available at SSRN: https://ssrn.com/abstract=2379029 or http://dx.doi.org/10.2139/ssrn.2379029
By Lin Tong