The impact of trading halts on liquidity and price volatility

Evidence from the Australian Stock Exchange

Alex Frino*, Steven Lecce, Reuben Segara

*Corresponding author for this work

Research output: Contribution to journalArticle

15 Citations (Scopus)

Abstract

This study examines market behaviour around trading halts associated with information releases on the Australian Stock Exchange, which operates an open electronic limit order book. Using the Lee, Ready and Seguin (1994) pseudo-halt methodology, we find trading halts increase both volume and price volatility. Trading halts also increase bid-ask spreads and reduce market depth at the best-quotes in the immediate post-halt period. The results of this study imply that trading halts impair rather than improve market quality in markets that operate open electronic limit order books.

Original languageEnglish
Pages (from-to)298-307
Number of pages10
JournalPacific-Basin finance journal
Volume19
Issue number3
DOIs
Publication statusPublished - Jun 2011

Keywords

  • Australian securities exchange
  • Liquidity
  • Market microstructure
  • Trading halts

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