We would like to thank Yakov Amihud, Kenneth Kim, Bruce N. Lehmann, and Sebastien Pouget for their useful comments and suggestions. We also thank Jose Antonio Pérez, from Sociedad de Bolsas, for providing the data. We have benefited from the comments of participants at the European Financial Management Association annual meeting, June 2006, Madrid, Spain; the European Financial Association annual meeting, August 2006, Zurich, Switzerland; the International Conference on High Frequency Finance, May 2006, Konstanz, Germany; the XIV Foro de Finanzas, November 2006, Castellón, Spain; the ABER Global Conference in Business and Economics, October 2008, Florence, Italy; and seminars at the University of Valencia, Spain, and at the University of Missouri. Roberto Pascual acknowledges the financial support of the Spanish DGICYT project SEJ2004-07530-C04-04. David Abad acknowledges the financial support of the Spanish DGICYT project ECO2008-02599/ECON and the Generalitat Valenciana project GVPRE/2008/316. We have also benefited from the financial support of Fundación de Estudios Financieros, and Comisión Nacional del Mercado de Valores (CNMV). Final contents are the sole responsibility of the authors.
SWITCHING TO A TEMPORARY CALL AUCTION IN TIMES OF HIGH UNCERTAINTY
Version of Record online: 18 MAR 2010
© 2010 The Southern Finance Association and the Southwestern Finance Association
Journal of Financial Research
Volume 33, Issue 1, pages 45–75, Spring 2010
How to Cite
Abad, D. and Pascual, R. (2010), SWITCHING TO A TEMPORARY CALL AUCTION IN TIMES OF HIGH UNCERTAINTY. Journal of Financial Research, 33: 45–75. doi: 10.1111/j.1475-6803.2010.01262.x
- Issue online: 18 MAR 2010
- Version of Record online: 18 MAR 2010
We evaluate a stock-specific circuit breaker implemented in several European stock exchanges, which consists of a short-lived call auction triggered by intraday stock-specific price limits. It differs from U.S. trading halts in that it is short-lived and nondiscretionary, and a trading mechanism (continuous or discrete) is always going. It differs from daily price limits in that trade prices are not restricted once the limit is hit. Intraday price ranges are smaller and adjusted to the recent volatility, so that limit hits are more frequent. We contribute to the debate about circuit breakers by enlarging the span of these mechanisms studied.