Can stock trading suspension calm down investors during market crises?

Weihua Chen, Jennifer Huang, Donghui Shi and Zhongzhi Song

Journal of Financial Markets, 2024, vol. 71, issue C

Abstract: We examine the trading behavior of investors facing a large number of firm-initiated stock trading suspension events during the Chinese stock market crisis in July 2015. Using account-level trading data from the Shanghai Stock Exchange, we find that investors with a higher fraction of holding value in suspension sell less (or purchase more) of non-suspended stocks. Consequently, non-suspended stocks whose shareholders have a high average account-level suspension fraction experience a short-term relative price appreciation. This evidence indicates that trading suspension can calm down investors and therefore help to stabilize the volatile market during crises.

Keywords: Stock trading suspension; Market crisis; Event study (search for similar items in EconPapers)
JEL-codes: G01 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:71:y:2024:i:c:s1386418124000521

DOI: 10.1016/j.finmar.2024.100934

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