B. Clapham, P. Gomber, Martin Haferkorn, Sven Panz
{"title":"Managing Excess Volatility: Design and Effectiveness of Circuit Breakers","authors":"B. Clapham, P. Gomber, Martin Haferkorn, Sven Panz","doi":"10.2139/ssrn.2910977","DOIUrl":null,"url":null,"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.","PeriodicalId":127865,"journal":{"name":"Political Economy: Budget","volume":null,"pages":null},"PeriodicalIF":0.0000,"publicationDate":"2017-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Political Economy: Budget","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2910977","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 3
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.
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