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Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits

Purpose: Despite regulatory claims of straitening volatility and preventing crashes, evidences on circuit breakers' ability to achieve so are nonconclusive. While previous scholars studies general performances of circuit breakers, the authors examine whether Malaysian price limits aggravate vol...

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Main Authors: Sifat, Imtiaz Mohammad, Mohamad, Azhar
Format: Article
Language:English
Published: Emerald Group Publishing Ltd. 2020
Subjects:
HG4501 Stocks, investment, speculation
Online Access:http://irep.iium.edu.my/84728/1/Sifat%20Mohamad%202020%20JOES.pdf
http://irep.iium.edu.my/84728/
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85081638755&doi=10.1108%2fJES-06-2018-0226&partnerID=40&md5=61fae272f95975087f89afe1cc172664
https://doi.org/10.1108/JES-06-2018-0226
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spelling my.iium.irep.847282020-11-14T15:20:18Z http://irep.iium.edu.my/84728/ Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits Sifat, Imtiaz Mohammad Mohamad, Azhar HG4501 Stocks, investment, speculation Purpose: Despite regulatory claims of straitening volatility and preventing crashes, evidences on circuit breakers' ability to achieve so are nonconclusive. While previous scholars studies general performances of circuit breakers, the authors examine whether Malaysian price limits aggravate volatility, impede price discovery, and interfere with trading activities in both tranquil and stressful periods. Design/methodology/approach: The study uses a combination of parametric and nonparametric techniques consistent with Kim and Rhee (1997) to examine the major ex-post hypotheses in circuit breaker research. Findings: For calm markets, the authors find significant success of upper limits in tempering volatility with low trading interference. Lower limits show mixed results. Conversely, in crisis markets limits fare poorly in nearly all aspects, particularly for lower limits. Practical implications: Ramifications of the paper's findings are discussed through highlighting the asymmetric nature of price limits' ex-post effects. The paper also contributes to regulatory debate surrounding the quest for an optimal price limit. Originality/value: The paper is the first of its kind in documenting long-horizon evidence of ex-post effects of a wide-band price limit. Moreover, the paper is unique in its approach in bifurcating circuit breaker performance along the line of market stability periods. © 2020, Emerald Publishing Limited. Emerald Group Publishing Ltd. 2020-04-01 Article PeerReviewed application/pdf en http://irep.iium.edu.my/84728/1/Sifat%20Mohamad%202020%20JOES.pdf Sifat, Imtiaz Mohammad and Mohamad, Azhar (2020) Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits. Journal of Economic Studies, 47 (2). pp. 333-350. ISSN 0144-3585 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85081638755&doi=10.1108%2fJES-06-2018-0226&partnerID=40&md5=61fae272f95975087f89afe1cc172664 https://doi.org/10.1108/JES-06-2018-0226
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic HG4501 Stocks, investment, speculation
spellingShingle HG4501 Stocks, investment, speculation
Sifat, Imtiaz Mohammad
Mohamad, Azhar
Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
description Purpose: Despite regulatory claims of straitening volatility and preventing crashes, evidences on circuit breakers' ability to achieve so are nonconclusive. While previous scholars studies general performances of circuit breakers, the authors examine whether Malaysian price limits aggravate volatility, impede price discovery, and interfere with trading activities in both tranquil and stressful periods. Design/methodology/approach: The study uses a combination of parametric and nonparametric techniques consistent with Kim and Rhee (1997) to examine the major ex-post hypotheses in circuit breaker research. Findings: For calm markets, the authors find significant success of upper limits in tempering volatility with low trading interference. Lower limits show mixed results. Conversely, in crisis markets limits fare poorly in nearly all aspects, particularly for lower limits. Practical implications: Ramifications of the paper's findings are discussed through highlighting the asymmetric nature of price limits' ex-post effects. The paper also contributes to regulatory debate surrounding the quest for an optimal price limit. Originality/value: The paper is the first of its kind in documenting long-horizon evidence of ex-post effects of a wide-band price limit. Moreover, the paper is unique in its approach in bifurcating circuit breaker performance along the line of market stability periods. © 2020, Emerald Publishing Limited.
format Article
author Sifat, Imtiaz Mohammad
Mohamad, Azhar
author_facet Sifat, Imtiaz Mohammad
Mohamad, Azhar
author_sort Sifat, Imtiaz Mohammad
title Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
title_short Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
title_full Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
title_fullStr Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
title_full_unstemmed Ex-post effects of circuit breakers in crisis and calm markets: Long horizon evidence from wide-band Malaysian price limits
title_sort ex-post effects of circuit breakers in crisis and calm markets: long horizon evidence from wide-band malaysian price limits
publisher Emerald Group Publishing Ltd.
publishDate 2020
url http://irep.iium.edu.my/84728/1/Sifat%20Mohamad%202020%20JOES.pdf
http://irep.iium.edu.my/84728/
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85081638755&doi=10.1108%2fJES-06-2018-0226&partnerID=40&md5=61fae272f95975087f89afe1cc172664
https://doi.org/10.1108/JES-06-2018-0226
_version_ 1684653095572733952
score 13.211869

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