Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100714
Authors: 
Ackert, Lucy F.
Church, Bryan K.
Jayaraman, Narayanan
Year of Publication: 
1999
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 99-1
Abstract: 
This paper analyzes the effect of circuit breakers on price behavior, trading volume, and profit-making ability in a market setting. We conduct nine experimental asset markets to compare behavior across three regulatory regimes: market closure, temporary halt, and no interruption. The presence of a circuit breaker rule does not affect the magnitude of the absolute deviation in price from fundamental value or trading profit. The primary driver of behavior is information asymmetry in the market. By comparison, trading activity is significantly affected by the presence of a circuit breaker. Mandated market closures cause market participants to advance trades.
Subjects: 
Financial markets
Flow of funds
Stock market
Document Type: 
Working Paper

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