The Effect of Trading Halts on the Speed of Price Discovery

29 Pages Posted: 29 Mar 2005

See all articles by Shmuel Hauser

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management; Government of the State of Israel - Israel Securities Authority

Haim Kedar-Levy

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management

Batia Pilo

Israel Securities Authority

Itzhak Shurki

Israel Securities Authority

Abstract

Trading halts are aimed at reducing information asymmetry by granting investors the opportunity to reassess trades upon arrival of new, substantial information. This study is the first to address the efficiency of the price discovery process with respect to time, i.e., the speed of adjustment to new information. A unique database allow us to conduct an event study analysis and measure the impact of trading halts on price discovery while controlling for content, operational and value effects. We find that information dissemination following trading halts is over 40% faster and that abnormal trading activity is positively related to the speed of price adjustment.

Keywords: Trading halts, speed of price discovery

JEL Classification: G14

Suggested Citation

Hauser, Shmuel and Kedar-Levy, Haim and Pilo, Batia and Shurki, Itzhak, The Effect of Trading Halts on the Speed of Price Discovery. Available at SSRN: https://ssrn.com/abstract=678744 or http://dx.doi.org/10.2139/ssrn.678744

Shmuel Hauser

Ben-Gurion University of the Negev - School of Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
+972 2 651 3939 (Phone)
+972 7 6472896 (Fax)

Government of the State of Israel - Israel Securities Authority

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

Haim Kedar-Levy (Contact Author)

Ben Gurion University of the Negev - Guilford Glazer Faculty of Business and Management ( email )

P.O. Box 653
Beer-Sheva 84105
Israel
(972) 8 6472569 (Phone)
(972) 8 6477697 (Fax)

Batia Pilo

Israel Securities Authority ( email )

Jerusalem 91341
Israel

Itzhak Shurki

Israel Securities Authority ( email )

Jerusalem 91341
Israel

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