The Effect of Information Motivated Trading Halts on Price Discovery: Evidence from the Australian Stock Exchange

Posted: 26 Mar 1997

See all articles by Michael J. Aitken

Michael J. Aitken

Macquarie Graduate School of Management

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Roland Winn

Capital Partners

Date Written: Undated

Abstract

This study examines the effects of information related trading halts on price discovery on the Australian Stock Exchange. After controlling for the effects of information, halts were found to be attributable to abnormally high trading activity, bid-ask spreads and excess volatility. Halts initiated by highly informative news releases appeared to be associated with the greatest amounts of abnormal volume, spreads and excess volatility. Furthermore, lost trading volume and price adjustment was not contained to the reopening period. Abnormal levels of trading activity, spreads and volatility appeared to persist for up to two days following halts. The evidence presented in this paper suggests that halts around informative news releases appears to hinder the price discovery process.

JEL Classification: G12, G14

Suggested Citation

Aitken, Michael J. and Frino, Alex and Winn, Roland, The Effect of Information Motivated Trading Halts on Price Discovery: Evidence from the Australian Stock Exchange (Undated). Available at SSRN: https://ssrn.com/abstract=8220

Michael J. Aitken

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

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

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

Roland Winn (Contact Author)

Capital Partners ( email )

2 Mount Pleasant
Cambridge CB3 0RN
United Kingdom

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