Why can’t I trade? Exchange discretion in calling halts

Date
2018-09-01
Authors
Marshall, Nathan
Rogers, Jonathan
Zechman, Sarah
Contributor
Advisor
Department
Instructor
Depositor
Speaker
Researcher
Consultant
Interviewer
Annotator
Journal Title
Journal ISSN
Volume Title
Publisher
Volume
Number/Issue
Starting Page
Ending Page
Alternative Title
Abstract
Stock exchanges exercise discretion when calling individual stock trading halts though the decision making behind the halt remains a “mystery” (WSJ, 2018). Between 2012 and 2015 halts are associated with large price movements (on-average 11%) and occur frequently with 97% of trading days having five or more halts. Given their importance, we investigate how exchanges use this discretion and whether the use of discretion alters the effectiveness of the halts. Our findings suggest halts reflect the preferences of exchange constituents as opposed to simply the stated objectives of the exchanges (i.e., minimizing excess volatility and trades at off-equilibrium prices). Specifically, we find halts are less likely for (i) good news than bad, (ii) firms with opportunistic CEO traders, and (iii) firms with low short interests. We also find some evidence that CEO characteristics are associated with halt outcomes. Concerning halt effectiveness, we find the level of unexplained halt discretion is positively associated with both small halt returns and larger post-halt stock return reversals, suggesting halts with more discretion are less effective.
Description
Keywords
trading halt, stock exchanges, disclosure, insider trading, discretion
Citation
Extent
Format
Geographic Location
Time Period
Related To
Table of Contents
Rights
Rights Holder
Local Contexts
Email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.