What Makes Circuit Breakers Attractive to Financial Markets?: A Survey

38 Pages Posted: 26 Aug 2004

See all articles by Yong H. Kim

Yong H. Kim

University of Cincinnati

J. Jimmy Yang

Oregon State University - College of Business

Abstract

After the stock market crash of October 1987, the Brady Report (1988) and several academic researchers suggested the imposition of "circuit breakers" to prevent the market from fluctuating excessively. Most financial markets in the world have imposed circuit breaker systems, in the form of price limits and trading halts, in an attempt to reduce excessive market volatility. Similar to any other regulations, circuit breakers have proponents and opponents. In this survey, we analyze the benefits and costs of each type of circuit breaker, provide existing theoretical models and predictions related to each type of circuit breaker, and present findings from empirical studies to justify or disqualify the existence of circuit breakers. In addition, we synthesize existing studies and offer directions for further research in this area.

Suggested Citation

Kim, Yong H. and Yang, J. Jimmy, What Makes Circuit Breakers Attractive to Financial Markets?: A Survey. Available at SSRN: https://ssrn.com/abstract=572902

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)

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)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
19
Abstract Views
2,657
PlumX Metrics