The Role of Trading Halts in Monitoring a Specialist Market

Are price limits really bad for equity markets?

“…6 This is not an unrealistic assumption in light of the various incidents of price manipulation cited by Leinweber and Madhavan (2001). Edelen and Gervais (2003) show that fraudulent and manipulative trading activities discourage genuine traders from participating in the market. Subsequent losses of reputation may cause market liquidity to drop or cause the market to lose new customers and listings.…”

The information content of trading halts

“…Utilizing a Walrasian framework, Bhattacharya and Spiegel (1991) also demonstrate that trading halts arise when the degree of information asymmetry outweighs other motivations of trading. Edelen and Gervals (2003) propose a model that uses firm-specific trading halts as a method to limit specialist power. Empirically, Lee et al (1994b) investigate the impact of trading halts on the trading characteristics of the halted stock after the halt is lifted.…”

Observed versus theoretical prices under price limit regimes

“…Related works include literature concerning trading halts and circuit breakers, e.g.,Christie, Corwin, & Harris (2002),Edelen and Gervais (2003) andGreenwald and Stein (1991).…”