Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174902 
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper No. 195
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
We investigate different designs of circuit breakers implemented on European trading venues and examine their effectiveness to manage excess volatility and to preserve liquidity. Specifically, we empirically analyze volatility and liquidity around volatility interruptions implemented on the German and Spanish stock market which differ regarding specific design parameters. We find that volatility interruptions in general significantly decrease volatility in the post interruption phase. Unfortunately, this decrease in volatility comes at the cost of decreased liquidity. Regarding design parameters, we find tighter price ranges and shorter durations to support volatility interruptions in achieving their goals.
Subjects: 
Circuit Breaker
Volatility Interruption
Volatility
Liquidity
Market Design
JEL: 
G14
G15
G18
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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