The Impact of Trading Halts on Liquidity and Price Volatility: Evidence From the Australian Stock Exchange

Pacific-Basin Finance Journal Vol. 19(3): 298-307 (2011)

Posted: 1 Jun 2020

See all articles by Alex Frino

Alex Frino

University of Wollongong

Steven Lecce

affiliation not provided to SSRN

Reuben Segara

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: June 1, 2011

Abstract

This study examines market behaviour around trading halts associated with information releases on the Australian Stock Exchange, which operates an open electronic limit order book. Using the Lee, Ready and Seguin (1994) pseudo-halt methodology, we find trading halts increase both volume and price volatility. Trading halts also increase bid-ask spreads and reduce market depth at the best-quotes in the immediate post-halt period. The results of this study imply that trading halts impair rather than improve market quality in markets that operate open electronic limit order books.

Keywords: Australian securities exchange, Market microstructure,Trading halts, Liquidity

JEL Classification: G10, G14

Suggested Citation

Frino, Alex and Lecce, Steven and Segara, Reuben, The Impact of Trading Halts on Liquidity and Price Volatility: Evidence From the Australian Stock Exchange (June 1, 2011). Pacific-Basin Finance Journal Vol. 19(3): 298-307 (2011), Available at SSRN: https://ssrn.com/abstract=3592004

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Steven Lecce

affiliation not provided to SSRN

Reuben Segara (Contact Author)

University of Sydney Business School ( email )

Sydney
Australia
+61 2 9351 8790 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://www.sydney.edu.au/business/about/our-people/academic-staff/reuben-segara.html

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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