Volume, Volatility, and New York Stock Exchange Trading Halts

Authors

  • CHARLES M. C. LEE,

  • MARK J. READY,

  • PAUL J. SEGUIN

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    • Lee and Seguin are from The University of Michigan and Ready is from The University of Wisconsin. We thank Bal Radhakrishna and Tony Kaylin for excellent research assistance and Vic Bernard, Hank Bessembinder, David Cutler, Jennifer Francis, Mason Gerety, Doug Hanna, Marilyn Johnson, Margaret Monroe, Pat O'Brien, Doug Skinner, and workshop participants at Arizona State, Georgia, Pittsburgh, Washington, Waterloo, Wisconsin, the Market Structure and Regulation Group at the University of Michigan, the NBER Working Group on Behavioral Finance, the 1992 FMA Annual Meetings, and the USC-UCLA-NYSE Conference on Market Microstructure for helpful comments. This research is conducted using the Cornell National Supercomputer Facility, a resource of the Cornell Theory Center, which receives major funding from the National Science Foundation and IBM.

ABSTRACT

Trading halts increase, rather than reduce, both volume and volatility. Volume (volatility) in the first full trading day after a trading halt is 230 percent (50 to 115 percent) higher than following “pseudohalts”: nonhalt control periods matched on time of day, duration, and absolute net-of-market returns. These results are robust over different halt types and news categories. Higher posthalt volume is observed into the third day while higher posthalt volatility decays within hours. The extent of media coverage is a partial determinant of volume and volatility following both halts and pseudohalts, but a separate halt effect remains after controlling for the media effect.

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