Do single‐stock circuit breakers provide a safety net for Canadian investors
Bibliographic Data
| ID | 21570879 |
|---|---|
| Authors | Lorne N Switzer (0000-0001-6830-018X, Concordia University Canada, corresponding author), Nabil El Meslmani (American University of Beirut Lebanon), Cagdas Tahaoglu (Concordia University Canada) |
| Year | 2021 |
| Volume | 38 |
| Issue | 1 |
| Pages | 92-111 |
| Publication date | 2021-03-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l Administration (JOURNAL) |
| Journal identifiers | ISSN: 0825-0383 • E-ISSN: 1936-4490 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1002/cjas.1585 |
| OpenAlex | W3049597040 |
| Language | EN |
| References cited | 17 |
This study looks at the market impact of recent regulatory changes in Canada that provide for trading halts on individual stocks that experience large upside or downside movements. The focus is on all stocks traded on the Toronto Stock Exchange since the inception of the single‐stock circuit breaker rule (SSCB) in February 2012, to replace the short‐sale uptick rule. The results support pricing efficiency: material information that caused the circuit breaker is incorporated in stock prices on the day of the halt (neither overreaction nor underreaction), with no decline in market liquidity. Using trade‐by‐trade data constructed on five‐minute trading intervals, we refine the daily results, and show that shocks in realized volatility are focused in the 10‐minute trading interval surrounding the halts. While circuit breakers provide a limited safety net for investors when their stocks are subject to severe volatility, they do not allow for a quick turnaround for stocks experiencing severe price decline events
Business · Circuit breaker · Economics · Financial economics · Market liquidity · Market maker · Monetary economics · Stock exchange · Stock market · Corporate Finance and Governance · Engineering · Financial Markets and Investment Strategies · Financial Risk and Volatility Modeling · Finance
| Highly cited | No |
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