The impact of trading halts on liquidity and price volatility: Evidence from the Australian Stock Exchange

Authors

Alessandro Frino, University of SydneyFollow
Steven Lecce, University of Sydney
Reuben Segara, University of Sydney

RIS ID

117889

Publication Details

Frino, A., Lecce, S. & Segara, R. (2011). The impact of trading halts on liquidity and price volatility: Evidence from the Australian Stock Exchange. Pacific-Basin Finance Journal, 19 (3), 298-307.

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