EconPapers    
Economics at your fingertips  
 

How effective are trading pauses?

Nikolaus Hautsch () and Akos Horvath

Journal of Financial Economics, 2019, vol. 131, issue 2, 378-403

Abstract: Exploiting Nasdaq order book data and difference-in-differences methodology, we identify the distinct effects of trading pause mechanisms introduced on US stock exchanges after May 2010. We show that the mere existence of such a regulation makes market participants behave differently in anticipation of a pause. Pauses enhance price discovery during the break but have adverse effects on price stability and liquidity after the pause. We find that pauses ultimately do not “cool off” markets but cause extra volatility. This implies a regulatory trade-off between the protective role of trading pauses and their adverse effects on market quality.

Keywords: Trading pause; “Magnet effect”; Price discovery; Volatility; Liquidity (search for similar items in EconPapers)
JEL-codes: G10 G14 G18 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X18302356
Full text for ScienceDirect subscribers only

Related works:
Working Paper: How effective are trading pauses? (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:131:y:2019:i:2:p:378-403

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-10-13
Handle: RePEc:eee:jfinec:v:131:y:2019:i:2:p:378-403