The Effect of Information Motivated Trading Halts on Price Discovery: Evidence from the Australian Stock Exchange
Posted: 26 Mar 1997
Date Written: Undated
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: Suggested Citation