Relative Performance between Trading Halts and Price Limits: Evidence from the Spanish Stock Exchange

19 Pages Posted: 22 Jun 2003 Last revised: 19 Nov 2016

See all articles by Yong H. Kim

Yong H. Kim

University of Cincinnati

José Yagüe

University of Murcia

J. Jimmy Yang

Oregon State University - College of Business

Abstract

We study the relative performance of trading halts and price limits using data from the Spanish Stock Exchange where both mechanisms have coexisted. According to our evidence, trading activity increases after either mechanism is triggered. Volatility stays the same after trading halts but increases after price limit hits. Our evidence also shows that the bid-ask spread is narrower after trading halts but wider after price limit hits. Information is efficiently reflected in stock prices once trading resumes after trading halts, but there is evidence of market overreaction for upper price limits. Our overall result may have important policy implications for financial markets in the world.

Keywords: Trading halts, Price limits, Market quality, Price discovery

JEL Classification: G14, G18, G19

Suggested Citation

Kim, Yong H. and Yagüe, José and Yang, J. Jimmy, Relative Performance between Trading Halts and Price Limits: Evidence from the Spanish Stock Exchange. International Review of Economics & Finance, Vol. 17, No. 2, pp. 197-215, 2008, Available at SSRN: https://ssrn.com/abstract=407842 or http://dx.doi.org/10.2139/ssrn.407842

Yong H. Kim (Contact Author)

University of Cincinnati ( email )

Lindner College of Business
410 Carl H. Lindner Hall, P.O. Box 210195
Cincinnati, OH 45221
United States
513-556-7084 (Phone)
513-556-0979 (Fax)

José Yagüe

University of Murcia ( email )

Department of Management and Finance
Campus de Espinardo s/n
Murcia, 30100
Spain
+34 868883862 (Phone)
+34 868887537 (Fax)

J. Jimmy Yang

Oregon State University - College of Business ( email )

School of Accounting, Finance, and Information Sys
426 Austin Hall
Corvallis, OR 97331
United States
541-737-6005 (Phone)
541-737-4890 (Fax)

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