Anatomy of a Market Failure: NYSE Trading Suspensions (1974-1988)

Utpal Bhattacharya () and Matthew Spiegel

Journal of Business & Economic Statistics, 1998, vol. 16, issue 2, 216-26

Abstract: A cross-sectional analysis of all trading suspensions that occurred during the period 1974-88 in the New York Stock Exchange reveals that, though the desire to maintain price continuity remains an important motivation to suspend trade, inventory-imbalance fears are pronounced for large firms. Adverse-selection concerns afflict all news-related suspensions irrespective of firm size. Furthermore, the authors find substitutability among the various dimensions of liquidity: although large-cap stocks have lower bid-ask spreads, they halt more often. A time series analysis shows that the resiliency of the exchange--its ability to absorb severe volatility shocks--has improved in this period.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:16:y:1998:i:2:p:216-26

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